The Kenya Bankers Association (KBA) has recommended that the central bank increase policy interest rates when it meets next week, arguing that tighter monetary policy is needed to address rising inflationary pressure.
In a report from its center for research, the KBA pointed to a recent uptick in headline inflation driven in part by global oil-price moves. Headline inflation rose to 6.7% in May, up from 5.6% in April, the association noted, bringing inflation nearer to the upper bound of the central bank's 2.5% to 7.5% target range.
The KBA said raising rates - if implemented - "can help keep inflation under control and support price stability in the months ahead." The research arm framed a policy tightening as a tool to restrain demand-side pressures and to reinforce the central bank's objective of maintaining price stability.
The association also warned that sustained or further increases in global fuel prices have the potential to transmit through the economy, lifting costs for transport and manufacturing and pushing up the prices of essential goods and services. The KBA’s report emphasized these channels as the principal near-term risks to the inflation outlook.
The appeal comes ahead of the central bank's scheduled policy meeting next week, where monetary authorities will consider the outlook and decide whether to adjust the policy rate. The KBA's call makes clear its view that current inflation dynamics warrant a tightening response from policymakers.
Information in this report is drawn from the KBA's published research and the recent inflation figures referenced in that research. The report sets out the association's recommendation and the pathways by which fuel-price increases could affect prices across multiple sectors of the economy.