Kenya Bankers Association is calling for a steady monetary policy stance ahead of the Central Bank’s February meeting, arguing that holding rates will allow earlier cuts to fully work through the economy, even as inflation risks from food prices and global pressures continue to loom.
The call comes ahead of the Monetary Policy Committee (MPC) meeting scheduled for February 10, 2026, where policymakers are expected to weigh domestic inflation trends, credit growth, exchange rate stability and global economic pressures.
In a research note dated February 9, 2026, the Centre for Research on Financial Markets and Policy, under the Kenya Bankers Association (KBA), said the MPC’s decision would be anchored on several key developments shaping the economy.
“First, headline inflation, though within target range, faces upsurge risks from food supply side,” the note stated, pointing to volatility in food prices as a key concern.
Headline inflation stood at 4.4 percent in January 2026, remaining within the official target band of 2.5 percent to 7.5 percent, but analysts warned that weather-related disruptions could reverse recent gains.
The research highlighted a growing divergence between core and non-core inflation, noting that non-core components, particularly food, have shown sharper swings.
According to the note, the risks of drought and a prolonged dry spell are threatening agricultural output and exerting pressure on prices, underlining the vulnerability of inflation to domestic supply shocks.
Despite these concerns, the bankers argued that broader price pressures remain contained.
Global commodity prices and Murban crude oil prices were described as steady, even as international supply chain indicators pointed to potential pressure.
The note suggested that while external risks persist, they have not yet translated into sustained domestic inflation.
On economic growth, the research observed resilience in domestic activity, supported by improving access to credit.
“Second, domestic economic growth depicting resilience and its fragility is easing off on a stronger supply of credit,” the note said, indicating cautious optimism about the recovery.
Interest rates were also highlighted as an important transmission channel.
“Third, domestic interest rates continue declining and yet to reflect the full transmission of previous successive cuts in the Central Bank Rate,” the researchers noted.
They argued that holding the policy rate steady would give banks and borrowers time to adjust fully to earlier easing.
Private sector lending was described as edging upward, though cautiously. “The private sector credit growth is edging upwards, though cautiously, as banks watch the evolution of nonperforming loans in key sectors,” the note said, reflecting lingering risk concerns within the banking system.
Exchange rate stability was cited as another pillar supporting the case for policy continuity.
“Exchange rate remains stable, supported by a steady current account deficit, strong inflows of diaspora remittances, and positive sentiment supported by a strong official foreign exchange reserves position,” the research stated.
Taking these factors together, the KBA-linked think tank concluded that there was merit to keep the CBR unchanged.
It argued that this would allow the full transmission of the previous CBR cuts through the market and ensure a non-disruptive transition of the entire banking sector’s Kenya shilling variable rate loan book to the revised risk-based pricing framework.
The Kenya Bankers Association echoed this view publicly, saying it was proposing maintaining the current monetary policy stance to allow full transmission of previous CBR cuts, support declining interest rates, and ensure a smooth transition to the risk-based pricing framework.
As policymakers gather for the MPC meeting, the debate reaffirms the delicate balance facing the CBK, nurturing growth and credit expansion while guarding against inflationary shocks, particularly from food supply constraints.
For now, the banking sector’s message is clear: patience and policy stability may be the safest course.
