The Kenya Bankers Association (KBA) has called on the Central Bank of Kenya (CBK) to raise the policy rate in its Monetary Policy Committee (MPC) meeting scheduled for June 9, 2026, citing rising inflationary pressures driven by higher oil prices, slowing economic activity, constrained credit growth, and potential risks to the Kenya shilling.
KBA noted renewed inflationary pressures stemming from oil supply shocks that could lead to a continued rise in prices. As of May 2026, Kenya’s headline inflation stood at 6.7%, the highest level recorded in more than two years, up from 5.6% in April 2026. The US-Iran conflict has disrupted key oil transit routes, including the Strait of Hormuz, one of the world’s most critical oil passage, leading to supply constraints and upward pressure on prices.
The association also pointed to weakening economic activity, with key indicators showing a slowdown in growth. Kenya’s economy grew by 4.6% in 2025, slightly lower than the 4.7% recorded in 2024. Forecasts point to a further slowdown in 2026 to 4.5%, attributable to geopolitical tensions. The Stanbic Purchasing Managers’ Index for May 2026 plunged to 46.6 from 49.4 in April, driven by accelerating contractions in both business activity and new sales.
The banking lobby further noted that recovery in credit growth remains constrained by the growing uncertainty over the direction of interest rates and a possible increase in credit risk amid mounting inflationary pressures. Private sector credit growth rose to 8.1% in March 2026, driven by a reduction in lending rates to 14.7% during the month.
Despite the Kenya Shilling remaining stable on the back of strong CBK foreign exchange reserves and inflows from tourism and diaspora remittances, the lenders association warned of potential risks arising from oil higher oil prices and a widening import bill. According to the latest CBK Weekly Bulletin the Kenya Shilling exchanged at KES 129.57 per US dollar. Foreign exchange reserves stood at USD 13.2 million, representing 5.6 months of import cover.
KBA’s Opinion on the CBR
Given the above developments and the balance of risks, KBA advocated for an increase in the Central Bank Rate (CBR) to contain inflation and ensure price stability in the medium term.
