Malawi central bank slashes interests rate to 13.5%

By Grace Dzuwa

BLANTYRE-(MaraviPost)-The country’s central bank, Reserve Bank of Malawi (RBM) on Friday announced slashing of the policy rate amid decline in inflation.

The chairman of the Monitory Policy Committee (MCP)who is also RBM’s Governor  Dr Dalitso kabambe disclose that the interest rate has been reduced from 14.5 percent to 13.5 percent.

This is the rate the commercial banks will be accessing the roans from the central bank.

Dr Kabambe told the news conference in Blantyre that the decision based on the developments, baseline inflation projection has further shifted to downwards.Inflation is now projected to 8.0 percent in 2019, 0.5 percent points lower than projected during the first MCP of 2019.

Kabambe said the committee’s assessment is that the projected improvement in macroeconomic outlook for 2019 remains firm,with inflation projected on a downward trend.

“The MPC has finally come up with the reference rate decision is a way of improving the base learning rate and this would be calculated based on the deposits that commercial banks are giving to the depositors to their commercial banks in order to have a better rate to speak to all the interest rates in the economy and for this rate to be worked on, it needs to engage the commercial banks” , he said.

However, Kabambe said the lombard rate has been maintained at 0.5 percent and 3.75 percentage,respectively.

“At this level,the policy stance remains adequately tight to guide inflation towards the medium term objective of 5 percent.Monetary policy decisions will continue to be guided by inflation forecasts and outcomes as well as progress in fiscal consolidation measures,” he said.

The governor also said with forecast in maize production, the country is likely to get the lowest inflation rate ever since 1990 this year, with growth projected at five percent, up from 4.2 percent in 2018.

The governor also said with forecast in maize production, the country is likely to get the lowest inflation rate ever since 1990 this year, with growth projected at five percent, up from 4.2 percent in 2018.

This growth is higher than the 3.5 percent global growth and 3.7 percent sub-Sahara African growth.

Kabambe said : “As inflation rate continues to go down, our objective is to ensure that inflation rate goes down to five percent, our policy rate would be at 11 percent. Looking at these macro-economic indicators, we all agree that our economy has indeed recovered.

“Recovery of economy is one side of the story, what sets in from there is what the private sector needs to grow the economy by expanding their economic activities so that the stability in the economy would be meaningful to Malawians,” he said.

Comparing with the first meeting they had in 2019 shows that the interest rate has a sharp decrease which is good for the economy.

In 2018 they did not reduce their policy rate because of some risks which the country were facing and in January this year they have reduce the policy rate by 100 basis points.

Lastly the headline inflation slowed down to an average of 8.7 percent during the first quarter of 2019 from 9.9 percent recorded during the previous quarter.

According to the last quarter of 2018, the non food inflation dropped to 5.8 percent from 8.0 percent and in March this year the non food inflation was recorded at 5 percent , similar to what was last a achieved in March 1991 in 28 years ago.

This must have been good news to borrowers who have been struggling to settle their loans with commercial banks.

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