RBM holds policy rate at 26% as inflation eases, economic pressures persist

The Reserve Bank of Malawi (RBM) has maintained the policy rate at 26 percent.

This decision was made at the third meeting of the Monetary Policy Committee (MPC) in 2025, amid ongoing efforts to stabilize inflation and revive the economy.

The decision comes as headline inflation dropped from 30.7 percent in February to 27.1 percent in June.

While this marks progress, the MPC noted the decline is not yet strong enough to warrant a shift in monetary policy.

“The recent disinflation is welcome, but not sufficient. Maintaining the current rate is essential to sustain momentum and guide inflation toward medium-term targets,” reads the MPC statement, which emphasized continued fiscal discipline and structural reforms to support the central bank’s efforts.

The inflation drop has brought mild relief, but rising prices for essential goods—especially food—continue to strain households.

Food inflation stood at 33.4 percent in the second quarter of 2025, disproportionately affecting low-income families and widening economic inequality.

The MPC stressed that monetary policy alone cannot tackle inflation and economic instability.

It called for broader support to productive and export-oriented sectors to boost local output, reduce import dependency, and stabilize prices.

On the global stage, the economic environment remains uncertain. The International Monetary Fund (IMF) projects global growth to slow to 3.0 percent in 2025, down from 3.3 percent in 2024, due to persistent geopolitical tensions and disruptions in global trade.

This affects Malawi through volatile fuel and fertilizer prices, both key inputs for local production.

While Brent crude oil prices have dropped—offering temporary relief on fuel—global urea prices are expected to rise, threatening food production costs and future inflation.

Despite these external challenges, domestic economic prospects are improving.

Malawi’s economy is expected to grow by 2.8 percent in 2025, up from 1.7 percent in 2024.

The growth is attributed to a relatively strong agricultural season and ongoing investments under the government’s Agriculture, Tourism, Mining, and Manufacturing (ATM-M) Strategy.

The RBM also noted that the exchange rate has remained stable, with the kwacha trading at K1,750.48 per US dollar as of June 30. Increased foreign exchange inflows from agricultural exports contributed to this stability, although high demand for forex remains a concern.

Looking ahead, the MPC underscored the need for policy alignment across sectors. It called on the government to implement fiscal consolidation and structural reforms—especially in agriculture and industry—to reinforce the impact of monetary tightening.

As the cost of living remains high and economic pressures persist, the RBM’s decision sends a clear message: taming inflation will require sustained discipline, both from policymakers and the broader economy.

The next MPC meeting is scheduled for October 29–30, 2025, where authorities are expected to re-evaluate whether the current stance is producing the desired outcomes.

About The Author