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Reserve Bank of Malawi slashes policy rate to 16 percent

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The Reserve Bank of Malawi (RBM) on Wednesday announced a 200 basis points cut on the policy rate from 18 to 16 percent following a Monetary Policy Committee meeting held between December 19 and 20.
It is the third time the bank has reduced the policy rate in the year 2017, from 22 percent in March, representing a 6 percentage point change in the year alone.
The policy rate is the interest rate at which commercial banks borrow from the central bank.
RBM Governor, Dalitso Kambambe, pointed out that the decision was arrived at by the committee following considerations on recent disinflation, inflation outlook and the desire to consolidate the gains made in stabilising the economy
“Consistently we have seen that inflation has been going down, the kwacha has been stable but also the monetary side has been easing. It necessitated that we should review both local and international economic conditions and, based on our analysis, we reduced the policy rate by 2 percentage points,” Kabambe said.
He added that, on global economic developments, the committee noted that economic activity is strengthening and that growth is projected to rise from 3.1 percent in 2016 to 3.6 percent this year, driven by developments in emerging and developing economies.
Kabambe further expressed optimism that positive economic gains the country has experienced in 2017 will continue in 2018 and that people should expect further reduction of the policy rate in the new year.
“All indications are that the economy has stabilised, we are now in the regime of low inflation and our projection is that it will remain in single digit for the rest of 2018 going into 2019; so, going forward we will continue to review the conditions.
“Our exchange rate has been stable for the past 18 months and basing on the foreign reserves that we have now both in the private and official, we have the highest despite this being the lean season. In 2018, we should have a more improved economy,” Kabambe said.

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