Nairobi — The Kenya Bankers Association has urged the Central Bank of Kenya to retain the benchmark policy rate at 8.75 percent, citing rising global risks that could pressure inflation and the shilling.

In its latest research note, the KBA Centre for Research on Financial Markets and Policy said external shocks--including higher global oil prices and geopolitical tensions--pose upside risks despite inflation remaining within the target range.

Headline inflation edged up to 4.4 percent in March, driven by increased food and transport costs, while core inflation remained relatively stable.

The lobby warned that disruptions to global supply chains and trade routes could push costs higher in the near term.

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"Recent cuts in the Central Bank Rate have helped ease short-term interest rates and support lending. However, structural challenges in the financial system mean these benefits are taking time to fully reach businesses and households," the note said.

Private-sector credit growth has improved but remains subdued, with banks still cautious due to elevated lending risks and high non-performing loans.

KBA also flagged pressure on the Kenyan shilling, linked to a widening trade deficit and potential disruptions to diaspora remittances, particularly from the Middle East.

It noted that faster growth in imports relative to exports continues to drive demand for foreign currency, weighing on the local unit.

While the economy remains on a recovery path, the association pointed to slowing private sector activity amid global uncertainty, including ongoing conflicts in the Gulf and Ukraine.

KBA said holding the current policy stance would provide stability as policymakers balance growth support and inflation control ahead of the upcoming Monetary Policy Committee meeting.