The Reserve Bank of Malawi (RBM) has hinted at the possible downward revision of the policy rate if inflation keeps decelerating on account of easing food prices.
RBM Deputy Governor for economics and regulation Kisu Simwaka said this on Wednesday in the wake of the easing of inflation rate in November to 27.9 percent from 29.1 percent mainly driven by a drop in food prices.
This is the first time since June 2025 for inflation rate to drop, according to National Statistical Office (NSO) Stats Flash, following a drop in food inflation rate from 32.4 percent in October to 30.1 percent in November.
In his commentary on Facebook, Simwaka said the easing of inflation, which followed the decline in maize prices by six percent in November, looks set to continue and could prompt the central bank to lower the policy rate, the rate at which commercial banks borrow from the central bank as the lender of last resort.
He said: “It is the stubborn nature of inflation that has made the Reserve Bank hesitant to reduce interest rates.
“But if inflation continues to decline, supported by encouraging macroeconomic data, it could be perfectly reasonable to reduce interest rates.”
Simwaka has projected a further decline of the inflation rate due to the stabilisation of food prices supported by improved food availability as traders offload maize stocks on the market amid expected government’s maize imports.
NSO data show that the drop in food inflation outweighs the rise of non-food inflation to 24.2 percent from 23.8 percent, a situation which shows that food prices influence inflation direction.
The International Food Policy Research Institute maize price monthly report indicated that the grain’s average retail price dropped by six percent in November from K1 238 per kilogramme (kg) in October to K1 168/kg.
Reads the report in part: “Maize prices declined across all regions as they declined in all but three monitored markets in Rumphi, Chimbiya in Dedza and Liwonde in Machinga all recorded a two percent price increase.
“Prices declined more in the Southern and Central regions by six percent on average than in the Northern Region, which declined by three percent with the most notable price drops registered in Chikwawa at 12 percent and Salima at 11 percent.”
In an interview on Wednesday, Economics Association of Malawi president Bertha Bangara-Chikadza said inflation trends highlight the country’s underlying food pressures that need to be addressed by either importing maize or winter cropping.
“While non-food inflation has remained relatively stable, the persistently high headline inflation trends suggest that the country must address the underlying food pressures,” she said.
Bangara-Chikadza, who teaches economics at the University of Malawi, said a critical intervention for long term stability is to strengthen winter cropping initiatives to ensure increased annual production and supply.
In a separate interview, Centre for Social Concern programme officer for economic governance Agnes Nyirongo observed that although non-food inflation is stable, transport costs have been volatile because of foreign exchange scarcity; hence, stifling business growth.
The Monetary Policy Committee of the RBM has kept the policy rate at 26 percent, with commercial banks’ lending rates at as high as 37 percent due to inflationary pressures.
