Inflation bites, as Policy Rate soars

The Central Bank is concerned that the continued rising inflation will have a knock on effect on ordinary citizens and make life tough.

The sentiments follow a recent decision by the Reserve Bank of Malawi-RBM’s Monetary Policy Committee-MPC to revise upwards the Policy Rate from 13% to 18% owing to the continued rising inflation.

In a statement the MPC Chairperson who is the Reserve Bank Governor Wilson Banda, says the adjustment has been necessitated by the rising inflation which they fear could frustrate the country’s economic recovery process while also eroding the buying power at household level.

“In the absence of measures to contain inflation, rising prices will continue to diminish the welfare of households. The MPC therefore considered expeditious tightening of monetary policy stance as further delays could risk entrenching inflation expectations,” Banda stated in the statement.

Banda has further explained that the consumer or the basic man will have to bear the blunt of the ever rising inflation which is also pushing the prices of necessities up at frequent intervals.

Currently the inflation rate stands at 25.9%, with high chances of it further going up.

The MPC has however maintained the Lombard rate at 20 basis points above the Policy rate and the LRR ratio on both domestic and foreign currency denominated deposits at 3.75 %.