NAIROBI, Kenya, Sep 26 – Bankers have urged the Central Bank of Kenya (CBK) to sustain the current monetary policy stance to anchor inflationary expectations and at the same time protect the ongoing economic recovery in the country.
This comes ahead of the CBK Monetary Policy Committee(MPC) meeting set for Thursday.
According to a research note prepared by the Kenya Bankers Association (KBA), maintaining the current stance is important given the enhanced optimism about the performance of the economy.
This follows the peaceful conduct of the general elections in August and the smooth transition in government.
CBK retained the base lending rate at 7.5 per cent in its last MPC meet despite uncertainty in the global economy.
KBA noted that the apex bank should maintain the rate given that while the current overall inflation remains elevated, inflationary expectations are easing largely driven by a decline in global oil prices.
Overall inflation in August remained elevated, rising further to 8.5 percent from 8.3 percent in July, driven by sustained increases in fuel prices amidst high food prices.
Further, the Association noted that CBK in its policy decision should consider that economic activity softened in the second and third quarters of 2022 on election jitters and uncertainty and this is expected to improve in the coming months.
“The decline in economic activity typically characterized periods preceding general elections in Kenya – as investors adopt a wait-and-see approach to scaling up their business,” said KBA.
It noted that with the peaceful elections and the smooth transition in government witnessed in the country, business sentiment has been enhanced and this will be supportive of stronger economic activities in the fourth quarter and beyond.
Finally, the Association also highlighted that private sector credit growth sustained strong double-digit growth rates for the fourth month in a row in June, projecting stronger impetus to economic growth in the coming months.
Private sector credit grew by 12.3 per cent in June; sustaining double-digit growth for the fourth month in a row.
“This is indicative of an underlying recovery in economic activity from the depressing effects of Covid-19 in 2020 and 2021,” said KBA.
