The Kenya Bankers Association (KBA) has called on the Central Bank of Kenya (CBK) to lower the Central Bank Rate (CBR) to ease access to credit and support economic growth, citing rising loan defaults and slowing private sector lending.

KBA’s push for a lower CBR is based on four key macroeconomic factors: stable inflation, high non-performing loans delaying lending rate adjustments, slowing economic growth at 4.0 per cent in Q3 2024, and a stable exchange rate supported by strong remittances and forex reserves.

“In view of these developments, and the growing need to reverse the deceleration in private sector credit, we call for a further cut in the Central Bank Rate (CBR) to provide additional impetus to the ongoing downward adjustments in the commercial banks’ lending rates,” KBA stated.

The association warned that without further monetary easing, credit growth would remain sluggish, constraining economic activity.

It highlighted that while CBK reduced the CBR by 75 basis points in October 2024, the pass-through effect on lending rates has been slow, particularly due to banks’ cautious approach amid high default risks.

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KBA also pointed out that the stable exchange rate environment, with the shilling averaging 129.87 against the US dollar in January 2025, provides room for CBK to cut rates without triggering currency volatility.

Strong foreign exchange reserves, robust remittances, and steady tourism inflows further support monetary policy easing.

“Amidst stable inflation and exchange rate, stimulating credit growth would be important to spur economic activity,” KBA stated.

With the CBK’s Monetary Policy Committee set to meet on Wednesday next wee, KBA insists that lowering the benchmark rate is necessary to make credit more affordable, stimulate economic growth, and reduce the strain of high borrowing costs on businesses and households.