Reserve Bank of Malawi maintains policy rate at 16%

Reserve Bank of Malawi (RBM) has announced that it has maintained the policy rate—also known as the bank rate—at 16 percent.

Addressing a news conference in Lilongwe on Wednesday, RBM  Governor, Dalitso Kabambe said  THE central bank’s Monetary Policy Committee (MPC) made the decision after a Macro-economic Conditions Review that took place on Tuesday 3 July, 2018.

This is the third time the central bank has maintained the policy rate at 16 percent.

“The economy is on a sound footing and you can even be witnesses. Food inflation is low and non-food inflation is also in low levels as well.

“Prices of maize and other essential commodities such as fuel have been stable for quite some time which shows that we are heading in the right direction. If things continue going the way they are, the economy will be very stable up to next year,” he said.

“The committee observed that despite a recent reduction in inflation to 8.9% in May 2018, upside risks to the inflation outlook persists,”  said Kabambe.

He said  MPC resolved to maintain the current monetary policy stance in order to consolidate [and] pre-empt possible build-up of inflation risks and ensure that inflation remains in single digit.

Kabambe said RBM  target a medium term objective of  five percent.

Technically, inflation refers to the rate of the general rise or movement in prices of goods and services consumed in an economy. It is also defined as a general and sustained rise in the level of prices of goods and services.

Kabambe, who also chairs the MPC, they maintained the Liquidity Reserve Requirement (LRR)—a percent of bank’s deposit kept at the central bank with no interest—at 7.5 percent and the Lombard rate, the rate at which stressed banks borrow from RBM at 200 basis points above the policy rate due to the favourable economic climate.

In his numerous addresses, President Peter Mutharika highlights the single-digit inflation rate among his administration’s achievements in terms of economic management.

 

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