The International Monetary Fund (IMF) has challenged central banks to be ready to adjust the course in the wake of intensifying inflationary pressures and Omicron coronavirus variant generating news uncertainties.
IMF director of monetary policy and capital markets department Tobias Adrian and chief economist Gita Gopinath said in their joint published blog on Friday that the sharp fall in oil prices following the discovery of Omicron and the rapid imposition of travel restrictions by countries is a sign of the volatility ahead.
Reads the blog in part: “A variant that significantly reduces vaccine efficacy could lead to further supply chain disruptions and contractions in labour supply pushing up inflationary pressures, while lower demand could have opposing effects.
“The sharp fall in oil prices following the discovery of Omicron and the rapid imposition of travel restrictions by countries is a sign of the volatility ahead.”
On the domestic front, the Reserve Bank of Malawi (RBM)Monetary Policy Committee revised upwards headline inflation rate target for this year by 0.3 percentage points 9.1 percent.
RBM Governor Wilson Banda said in the statement that the revisions reflected the impact of the recent increase in domestic fuel pump prices, a higher-than-anticipated rise in maize prices in the fourth quarter of 2021 and persistent disruptions to global supply chains.
“Supported with active open market operations, the adopted monetary policy stance is expected to enhance production of import substitutes and general economic recovery without necessarily jeopardising the medium-term inflation target,” he said.
In a separate interview, Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni said the central bank needs to reduce some liquidity on the market to contain inflation.
“We all know that this is imported inflation being induced by low output and also global inflationary pressures,” he said.