Monetary Policy Committee (MPC) of the Reserve Bank of Malawi maintains the Policy Rate at 26 percent 

The Monetary Policy Committee (MPC) of the Reserve Bank of Malawi (RBM) has agreed to maintain the Policy Rate at 26 percent.

This follows a second meeting of 2024 the committee held on May 2 and 3 to review recent economic developments.

In a statement after the meeting, RBM Governor Wilson Banda said the Committee also resolved to maintain the Lombard rate at 20 basis  points above the policy rate and the Liquidity Reserve Requirement (LRR) ratio for foreign currency deposits at 3.75 percent.

Simply put, the Lombard rate is the interest rate charged by central banks when extending short-term loans to commercial banks.

On the other hand, LRR is the percentage of a depository institution’s cash that the central bank mandates it has on hand, rather than being lent out or invested.

According to Banda, the Committee, however, raised the LRR  ratio for domestic currency deposits by 100 basis points to 8.75 percent.

“In making this decision, the MPC took into account the recent deceleration in inflation and its continued downward projected trend in the near term.

“However, the Committee  noted that there are upside risks to the inflation outlook, including the projected lower crop harvest, high money supply growth and higher global oil prices,” Banda said.

Crop harvesting is expected in the final weeks of April to May 2024, and maize production is likely to be below average in the southern and central regions. Heavy rainfall in Nkhotakota and Karonga (central Malawi) between the end of February and the first week of March 2024 caused flooding.

According to International Food Policy Research Institute (IFPRI) report, Retail prices of maize declined by 12 percent in February. Maize prices were highest in the Southern Region and lowest in the Northern region. ADMARC sales were reported in 22 of 26 markets monitored by (IFPRI). Retail prices of maize in Malawi were higher than in neighboring countries.

Money Supply M2 in Malawi increased to 3885.90 MWK Billion in February from 3807.60 MWK Billion in January of 2024. Money Supply M2 in Malawi averaged 157704.58 MWK Billion from 1975 until 2024, reaching an all time high of 1351279.36 MWK Billion in April of 2020 and a record low of 90.70 MWK Billion in February of 1976. source: Reserve Bank of Malawi

After breaking $95 a barrel in late September, oil prices decreased by 4.2 percent between August 2023 and February 2024, when they stood at a monthly average of $80.70. On the demand side, weaker expectations about global demand growth have contributed to downward price pressures.