Reserve Bank of Malawi hints at tight policy
The Reserve Bank of Malawi (RBM) has hinted at maintaining a tight monetary policy stance to continue containing inflationary pressure emanating from soaring commodity prices, among other factors.
A tight monetary policy entails actions by a central bank in, among other interventions, reducing money supply and increasing the policy rate, and normally triggers a rise in interest rates.
This comes as the Monetary Policy Committee of RBM, chaired by governor Wilson Banda, meets in Lilongwe for monetary policy determinations.
Among other things, the committee is expected to determine whether to or not adjust policy rate—the rate at which commercial banks use to borrow from the central bank as lender of last resort.
But in its March 2023 Market Intelligence Report published on Tuesday, the central bank says despite the favourable inflation performance reported in some countries, it will take some time for most of the global economies to achieve levels of inflation within their central bank targets.
The report adds that reversion to growth-enhancing single-digit levels of inflation requires that there be a protracted period of tight monetary policy stance in order to anchor inflation expectations and suppress the second-round effects of the adverse supply-side shocks.
“It is therefore not surprising that global central banks continue to further tighten their stance of monetary policy, despite the prevailing low levels of economic growth,” the report reads.
Meanwhile, the central bank has indicated in a communication that it will hold Monetary Policy Technical Forums in Lilongwe and Blantyre next week to announce the decision.
“The purpose of these technical forums is to communicate Monetary Policy decisions and engage the private sector on the same,” reads the communication from RBM.
In an interview Wednesday, economist Exley Silumbu said there are many factors that should be looked into to anchor inflation rather than monetary policy alone.
He said while the central bank looks at the monetary policy, other players should look at the structured and supply side.
“We are seeing that with this inflation, it is the supply side that is dominating therefore that needs to be controlled and aside from that we have to look at to what extent are financing of government debts contributing to inflation because the country’s debts are high,” Silumbu said.
Malawi’s inflation has been on the rise since 2021, hitting 27 percent as of last month.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.
