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Private sector hails central bank for maintaining policy rate

By George Lumwira

Captains of industry have welcomed the Reserve Bank of Malawi’s decision to maintain the policy rate at 12%.

The bank’s Monetary Policy Committee resolved this week to maintain the rate which determines the cost of borrowing at 12 % as well as maintaining the liquidity requirement ratio -the deposits that commercial banks are required to have at the central bank at 3.75 %.

According to the MPC’s statement, the decision has been made after noting a stable inflation outlook in the medium-term that was envisaged earlier.

“In arriving at this decision, the Committee noted that the inflation outlook has remained broadly unchanged from what was envisaged during the Fourth 2020 MPC.

“Further, the MPC noted that there is need to allow the impact of the November 2020 Policy rate reduction to transmit through the economy. The decision was also deemed necessary to contain the impending inflationary pressures whilst at the same time providing space for supporting recovery of the economy in the wake of the second-wave of the COVID-19 pandemic,” reads the statement in part.

Reacting to the development, the Malawi Confederation of Chambers of Commerce and Industry MCCCI’s Economist Madalitso Kazembe said this is an expansionary monetary direction which will accommodate struggling businesses at a time they are suffering from the pandemic’s effects.

“This is a good development to industry players because it will accommodate them especially now when most of them are struggling financially due to Covid-19 pandemic effects and they could not rise of cost of borrowing,” Kazembe said.

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she went on to say  that now they anticipate that inflation rate will remain stable mainly due to prevailing low maize prices and the imminent harvest period.

In November last year, the central bank reduced the policy rate by 150 basis points from 13.5 % to 12 %.

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