Harare – Central banks in the SADC region maintained interest rates in the first quarter of 2021 as monetary authorities strove to stabilise economies following the adverse impact of the COVID-19 pandemic.
The Bank of Namibia left its benchmark interest rate steady at a record low of 3.75 percent, something that the South African Reserve Bank also did in January. The Bank of Botswana also kept its benchmark interest rate unchanged at 3.75 percent.
According to Trading Economics, the decision is meant to continue supporting economies amid the impact of the global pandemic and came against a backdrop of low inflationary pressures.
The Reserve Bank of Malawi left its benchmark policy rate unmoved at a record low of 12 percent in January 2021. The decision, authorities said, was aimed to containing impending inflationary pressures whilst at the same time providing space to support economic recovery.
Malawi’s Monetary Policy Committee also said the decision would allow the impact of the November 2020 policy rate reduction to transmit and permeate through the economy
On the other hand, the Reserve Bank of Zambia and the Reserve Bank of Zimbabwe adjusted rates in the first quarter of 2021.
Zambia raised its key interest rate by 50 bps to 8.5 percent to anchor inflation expectations and restore macroeconomic stability. The Reserve Bank of Zimbabwe raised its overnight lending rate to 40 percent from 35 percent to ensure that inflation is under control and that the foreign exchange auction system is sustained to support the growth of the economy.
The increment in Zambia was the first rate increase since November 2019, amid rising inflationary pressures, which are pushing inflation further away from the upper bound of the bank’s six to eight percent target range.
The risks to the inflation outlook are assessed to be tilted to the upside and inflation is expected to deviate further from the upper bound of the target due to the lagged pass-through from the depreciation of the kwacha and sustained fiscal deficits.
In the medium-term, the economy is projected to recover supported by mining, utilities and information & communication. The bank added it stands ready to further tighten monetary policy if needed.
Zimbabwe’s policymakers said that a new wave of the COVID-19 pandemic and its adverse impact on the economy were cause for concern, but they were optimistic that the expected economic growth of 7.4 percent in 2021 was achievable. They also projected annual inflation to close the year at below 10 percent.
The measured optimism is based on the expected significant growth of the agricultural output in 2021, as a result of the good rainy season, fiscal sustainability and the Bank’s focus on price and financial system stability.