Economic commentators foresee a possible slash in policy rate in the short to medium terms, as inflation is projected to start decelerating as the country commences the harvest season.
This, they say, could lead to a drop in interest rates.
The Reserve Bank of Malawi’s Monetary Policy Committee maintained the policy rate at 12 percent. It was last slashed in November 2020 from 13.5 percent.
In its Monthly Economic Review issued Wednesday, National Bank of Malawi plc pointed to possible stability in most economic fundamentals.
“The monetary policy environment is therefore geared towards taking advantage of the historically low interest rates expected to prevail in 2021 and funding opportunities availed by growing pension funds to deepen the financial sector,” the report reads.
Chancellor College-based economist Ben Kalua said in an interview Wednesday that RBM would be obliged to reduce the rates in correlation with inflation trends.
“We expect that kind of reaction in coming months as long as the inflation rate is on a downward trend,” Kalua said.
Another economics commentator Frank Kamanga said the outlook was pointing towards a possible rate cut.
“We are expecting bumper maize yield which will lead to a drop in prices,” Kamanga said.
But Economics Association of Malawi Executive Director Kettie Nyasulu said in a separate interview that, other factors considered, a possible reduction of the policy rate may tally.
“Despite trends in inflation, there are other factors that may be considered that may impact the decision to reduce interest rates such as Covid,” Nyasulu said.