NAIROBI, Kenya – As the Central Bank of Kenya’s (CBK) Monetary Policy Committee (MPC) prepares for its pivotal meeting on Tuesday, February 10, 2026, the Kenya Bankers Association (KBA) has strongly urged for the maintenance of the current benchmark interest rate at 9 percent. This call comes amidst ongoing economic adjustments and a desire to foster stability in the nation’s financial landscape.
Leading the charge, KBA CEO Raimond Molenje emphasized that retaining the existing rate would provide banks with the necessary environment to fully implement the new risk-based lending framework. This transition is crucial for the banking sector, allowing for a more nuanced approach to credit assessment and pricing, ultimately benefiting both lenders and borrowers across Kenya.
The Case for Stability: Economic Transmission and Risk-Based Lending
The banking industry’s stance is rooted in the belief that the full effects of previous rate reductions are still permeating the economy. A research note from the KBA highlighted that any immediate shift in policy could trigger a fresh wave of loan repricing, introduce uncertainty for customers, and potentially dampen the recovery of private-sector credit, which, while showing signs of life, remains fragile.
Commercial lending rates have seen a gradual decline following earlier policy easing by the CBK. Bankers argue that an unchanged benchmark rate would grant financial institutions the time needed to stabilize their loan portfolios under the new pricing model. This approach also aims to shield Kenyan borrowers from abrupt increases in their loan repayment obligations, a concern that resonates deeply with households and businesses still navigating economic recovery.
The KBA’s Centre for Research on Financial Markets and Policy further elaborated that maintaining the current monetary policy stance is essential for the complete transmission of prior Central Bank Rate (CBR) cuts. This would support the continued downward trend in lending rates and ensure a seamless transition to the risk-based pricing framework, a key reform for the sector.
Specifically, the KBA stated that keeping the CBR unchanged would
“allow the full transmission of previous cuts and ensure a non-disruptive transition of Kenya shilling variable-rate loans to the revised risk-based pricing framework by end February 2026”.
External Buffers and Inflationary Pressures
Kenya’s improving external economic position significantly bolsters the argument for policy stability. Robust foreign exchange inflows and a narrowed current account deficit have alleviated pressure on the CBK to adjust the benchmark rate. Diaspora remittances, a consistent and vital source of foreign currency, have remained strong, underpinning the shilling’s stability
In 2025, diaspora remittances surpassed USD 5 billion (approximately KES 644 billion), making them Kenya’s largest foreign exchange earner and a critical buffer for the national currency. Coupled with improved export earnings, these factors have ensured that foreign exchange reserves are at comfortable levels, providing the CBK with a crucial safeguard against global economic shocks
Despite these positive external indicators, the KBA has also flagged potential upside risks to inflation, primarily linked to the volatility of food prices. A prolonged dry spell could impact agricultural output, leading to price surges in key food items. While core inflation remains relatively subdued, the divergence between core and non-core inflation, largely driven by food, presents a delicate balancing act for the MPC.
Lessons from Past Decisions and Future Outlook
The banking sector’s recommendation is informed by historical MPC decisions. Past instances of rapid interest rate changes have often led to market confusion, making borrowing more expensive and stifling credit demand. Conversely, the full impact of rate cuts has historically taken time to materialize, as banks adopt a cautious approach, especially when non-performing loans are elevated.
The upcoming MPC meeting follows a decision in December 2025, where the committee lowered the CBR by 25 basis points to 9.0 percent from 9.25 percent. This marked its second consecutive cut, citing easing inflation, improved private sector credit uptake, and a stable exchange rate. The MPC’s aim at the time was to stimulate lending and support economic growth, noting that inflation risks had moderated
This decision reflected easing inflationary pressures and a global trend of central banks cautiously adjusting policies.
Treasury bill auctions in early February 2026 saw heavy oversubscription, with bids more than double the offered amount, signaling strong investor confidence in the Kenyan economy
This, combined with Moody’s recent upgrade of Kenya’s outlook due to declining default risk, paints a picture of growing economic resilience.
As the MPC convenes, the banking sector’s unified voice underscores the importance of a measured approach to monetary policy, aiming to consolidate recent gains and ensure a stable, predictable environment for Kenya’s financial future.
