Gerald Kampanikiza, News Reporter
BLANTYRE – Malawi Monetary Policy Committee (MPC) will closely monitor inflation developments in the next few months, and stands ready to adjust the policy rate upwards should inflationary pressures persist.
It follows a meeting by the Committee on 27th July, 2022, to review the recent economic developments and decide on the monetary policy stance.
According to a statement signed by MPC chairperson, Dr Wilson Banda, pressures on inflation are likely to continue, largely due to persistence of supply – related shocks to food and energy prices arising from the war in Ukraine.
The inflation in Malawi will also be triggered by impact of the upward adjustment in domestic fuel pump prices effected on 23rd June, 2022 including a seasonal increase in prices of domestically-produced agricultural food items, exchange rate pressures, and persistent fiscal slippages.
“The above factors have shifted upwards the trajectory for inflation,” Dr Banda said.
Meanwhile, the Committee decided to maintain the Policy rate at 14.0 percent, the Liquidity Reserve Requirement ratio on domestic and foreign currency denominated deposits at 3.75 percent; and the Lombard rate at 20 basis points above the Policy rate.
“This decision has been necessitated by the need to allow more time for the impact of the April 2022 Policy rate increase to transmit through the economy,” he added.
Dr Banda further highlighted that the global economic outlook remains uncertain due to the ongoing Russia – Ukraine conflict.
The resurgence of COVID-19 pandemic in China, tight financial conditions due to monetary policy reaction to the mounting inflation pressures, and persistent supply chain disruptions are also part of the factors.