Reserve Bank of Malawi adopts symmetric inflation forecasting
The Reserve Bank of Malawi (RBM) has adopted what it calls a symmetric band of 2.0 percentage points around the point target of its inflation projection.
This means when setting an inflation target, the central bank will aim at maintaining the rate within a range of plus or minus 2.
This came out during a press briefing RBM Governor, Dalitso Kabambe held in Blantyre last week.
He said the initiative was mainly to align RBM stance on inflation targets to global trends and not to ease pressure on attaining a 5 percent inflation goal by the first quarter of 2021.
“We are not shifting away from the 5 percent target but we are modernising, we have to reform. In the past it was best practice of doing point inflation targets but current knowledge is that we need to use inflation targets that are symmetric in a band. This is the best practice that central banks in the world are adopting.
“The target remains 5 percent but in a range where you have plus or minus 2 percentage points so that if its 5.1 or 4.8 percent you have still met the target, it’s a change not just for us but the rest of the world,” Kabambe said.
The central bank pegged this year’s average inflation at 8.8 percent from 9.4 percent registered in 2019.
Towards the end of 2019 inflation inched upwards into a double digit range owing to escalating food prices in the country.