The Monetary Policy Committee (MPC) of the Reserve Bank of Malawi (RBM) has maintained the policy rate at 26 percent.
The policy rate is the rate at which commercial banks borrow money from the central bank.
This is contained in a statement of the MPC’s third meeting of 2024 published by the central bank yesterday afternoon.
RBM Governor Wilson Banda chairs the committee.
- Advertisement -
According to the statement, the MPC noted that the current monetary policy stance has stabilised non-food inflation and sufficiently contained the spill-over effects of food inflation to non-food inflation.
- Advertisement -
“The committee further noted that maintaining the current policy stance will help in containing inflationary pressures and ensure that inflation declines towards the medium-term objective of 5 percent,” the statement reads.
In an interview, Malawi Confederation of Chambers of Commerce and Industry Chief Executive Officer Daisy Kambalame said such a decision was expected.
“Our expectation was that the policy rate would be maintained. At 26 percent, the policy rate is already high, affecting business performance, in terms of borrowing costs, investment and potential for growth. An increase in policy rate at this point in time would lead to an immediate increase in commercial lending rates, resulting in reduced amount of loans to the private sector,” Kambalame said.
In a separate interview, economist Marvin Banda said the stance taken by the MPC is somewhat concerning because RBM is taking credit for stability that is inherent in any system that experiences shocks.
- Advertisement -
He added that the foreign exchange market is still experiencing a gap between the official rate and the unofficial rate, which is helping non-food inflation to remain elevated.
“Considering that the government is attempting to mitigate the potential effects of food shortages expected during the remainder of the year, Malawians should expect fiscal dominance to prevail, further undermining the conceited efforts of monetary policy,” Banda said.
