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RBM maintains stance on policy rate

 

Reserve Bank of Malawi (RBM) has maintained the policy rate at 25 percent following a decision of its Monetary Policy Committee (MPC) which reviewed recent global and domestic economic developments.

Based on the performance of inflation rates which is on the downward spiral, experts last month predicted that RBM was likely to cut the bank rate.

Chaired the monetary policy meeting: Chuka
Chaired the monetary policy meeting: Chuka

In its February economic report, Nico Asset Managers said the monetary policy rate may be adjusted downwards if the inflation rate continued to reduce on account of expected seasonal appreciation of the kwacha and low global oil prices.

The monetary authority, however, admits through the committee that inflation continued the downward path to 18.2 percent in March 2015 from 24.2 percent in December 2014 which according to the authority is in line with its projections.

It says inflation is expected to trend downwards to around 15 percent by June 2015 on account of the stability of the kwacha and favorable international oil prices.

The central bank, however, notes that the downward trend could be reversed depending on timeliness of the financing options available to Government to deal with the impact of the drought.

Further, it points that monetary policy remained tight in the first quarter of 2015 saying money supply growth decelerated to 15.0 percent in February 2015 from a high of 34.0 percent in February 2014.

It says monetary policy remained tight in the first quarter of 2015, however, money supply growth decelerated to 15.0 percent in February 2015 from a high of 34.0 percent in February 2014.

And on fiscal performance, RBM says up to the third quarter of the 2014/15 fiscal year was unsatisfactory as domestic borrowing requirements exceeded expectations as contained in the budget.

It says further pressures on the fiscal budget may arise from unanticipated demands related to the impact of the floods and the drought.

But commenting on the development, Economist Ben Kalua faults government for keeping the rate as high as it drives away investors.

He said: “People have for some time complained of high interest rates which have forced commercial banks to raise lending rates making the people borrow money for their various enterprises.

“Inflation in Malawi is largely determined by reduction or increase in food products. Time is now for government to establish where all this comes from and find long lasting solutions to this to woo more investors thereby booming our economy. We want Malawi to attain a single digit inflation rate.”

According to the central bank, global economy is expected to grow by 3.5 percent in 2015 and further pick up to 3.8 percent in 2016 and prospects for global inflation remain favorable in 2015.

 

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