The Monetary Policy Committee has raised the Policy rate by 200 basis points to 14 percent as inflation pressures continue to mount.
A report by the Reserve Bank of Malawi says the committee at its second meeting of 2022 held on 29th April decided to raise the policy rate to 14 percent from 13 percent due to inflation pressures following persistence of the pandemic-induced supply-demand imbalances, supply-chain disruptions, and rising global energy and food prices, which have been compounded by the Russia-Ukraine war.
Meanwhile the central bank has warned of more persistent price pressures due to prominence of fuel and other war-affected commodities in the domestic consumption basket.
In order to contain the impact of these pressures on inflation expectations, the Committee decided to raise the Policy rate to 14 percent while maintaining the rest of the policy parameters at their previous level.
Meanwhile, the MPC maintained the Liquidity Reserve Requirement (LRR) ratio on domestic and foreign currency denominated deposits at 3.75 percent; and the Lombard rate at 20 basis points above the Policy rate.
At the moment, the Malawi kwacha has continued to depreciate against other major foreign currencies during the first quarter of 2022, largely reflecting a seasonal decrease in supply of
foreign exchange.
In particular, the kwacha depreciated by 0.5 percent against the US dollar; 0.5 percent against the pound; and 16.0 percent against the South African rand during the period. However, the local currency appreciated by 9.4 percent against the euro.