The Reserve Bank of Malawi (RBM) Monetary Policy Committee (MPC) has maintained at 26 percent the policy rate, a key driver of interest rates on loans.
In a statement issued after the First 2025 MPC meeting last week, RBM Governor MacDonald Mafuta-Mwale said the decision is meant to support economic activity and boost foreign exchange reserves.
He said the central bank maintained the policy rate given the dual dynamics in food and non-food inflation developments observed in the fourth quarter of 2024 and the inflation outlook for 2025.
Said Mafuta-Mwale: “RBM is working on measures to incentivise productivity, foreign exchange generation and seal loopholes in foreign exchange management in the country.
“Furthermore, the MPC will enhance its engagement with stakeholders across the public and private sectors to collaboratively implement financial sector reforms and introduce incentives for the real sector.”
RBM data show that inflation declined to an average of 29.2 percent in the last quarter of 2024, from an average of 33.9 percent in the previous quarter as compared to 31.5 percent for the last quarter of 2023.
In December 2024, headline inflation accelerated to 28.1 percent from 27 percent in November 2024 primarily influenced by food inflation increasing to 35.6 percent from 33.7 percent in November 2024.
RBM has also projected inflation to slow down to 22 percent by the end of 2025 due to favourable base effects and a supportive monetary policy stance
The policy rate has remained stable throughout the past nine months after hiking the policy rate by a cumulative 12 percentage points, from 14 percent in May 2022 to 26 percent in March 2024, the RBM held the rate stable through the rest of 2024.
Meanwhile, RBM has retained the liquidity reserve requirement; the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals, ratio at 10 percent for local currency deposits and 3.75 percent for foreign currency deposits.
