By Chisomo Phiri
The Malawi’s central bank, the Reserve Bank of Malawi (RBM) has announced adjusting upwards the policy rate by two percentage points from 22 percent to 24 percent.
A policy rate is the rate at which commercial banks borrow from the central bank as lender of last resort.
However, as a key driver of interest rates on loans, the decision will have ripple effects as commercial banks will likely implement reciprocal adjustments to the price of loans.
In a statement published on Friday, RBM Governor Wilson Banda said the Third Monetary Policy Committee (MPC) Meeting revised upwards the policy rate by 200 basis points as price pressures have intensified, such that inflation is projected to remain substantially above the medium-term target for longer.
Practically, the decisions mean that the RBM is trying to reduce money supply in the economy by increasing the cost of borrowing.
This comes at a time authorities are battling a high inflation rate recorded at 27.3 percent as of June, according to National Statistical Office (NSO).
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