Reserve Bank of Malawi (RBM) has maintained the policy rate at 13.5 percent, a move done in view of emerging upward risks to the medium-term inflation path.
Newly-appointed RBM Governor, Wilson Banda, announced this on Friday that the Monetary Policy Committee (MPC), which he chairs, adopted policy stance as Covid-19 is hitting hard the economy.
In a statement which the bank released, RBM has also maintained the Liquidity Reserve Requirement (LRR) ratio on both local and foreign currency deposits at 3.75 percent.
Banda said the figures have been arrived although inflation developments were favourable in the first half of the year.
The governor has since observed that economic activities have slowed down leading to a lower projection of GDP for 2020, reflecting the effects of COVID-19 pandemic on various sectors of the economy.
RBM also projects 2020 inflation at 9.8 percent, 0.4 percentage points higher than 2019’s 9.4 percent.
“Headline inflation declined to an average of 8.9 percent in the second quarter of 2020 from an average of 10.6 percent in the first quarter, on the back of weakening food and domestic pump fuel prices.
“However, there are impending significant inflationary pressures emanating from a gradual pick-up in food prices (largely maize), increased short term pressure on the exchange rate, increase in global oil prices and increased public sector financing requirements,” the bank projects.
The adopted policy stance is deemed adequately tight to deal with emerging risks while also aiding the growth momentum.