Paul Nyakazeya, Group Digital Editor 
THE Reserve Bank of Zimbabwe (RBZ) has maintained policy and overnight accommodation rates at 60 percent and 40 percent, respectively, saying this will help contain inflationary pressures and tie down money supply growth.
The apex bank recently raised the policy rate from 40 percent in response to resurgent inflationary pressures.
The policy rate is what commercial banks pay when they borrow from the central bank. It generally serves as a reference rate for the entire financial system.
Reserve Bank of Zimbabwe governor, John Mangudya
“In light of obtaining macroeconomic stability, the committee resolved to maintain the existing monetary policy stance as follow… maintaining the bank policy rate at 60 percent and the medium-term bank accommodation facility interest rate at 40 percent,” central bank governor John Mangudya said this week after a Monetary Policy Committee (MPC) meeting.
Following a period of sustained stability in Zimbabwe, which saw inflation falling from a peak of 838 percent last July to 50 percent in August this year, inflation increased to 52 percent in September before rising to 54 percent in September, and again to 58,4 percent in November.
After the recent adjustment, the interest rate is now above inflation for the first time in over 12 months.
Business leaders have welcomed interest rate adjustment, saying it will encourage savings and deter speculation.
“As business, the action by the reserve bank to move the rates to 60 percent is a positive one. We welcome it. At least for now we now have positive interest rates,” the president of the Confederation of Zimbabwe Industries (CZI), Kurai Matsheza, told The Financial Gazette recently.
“We are looking forward to this encouraging savings.
“This will also discourage speculative borrowing,” he said.
The central bank says it has seen indicators for speculative borrowing within the market, which it suspects to be motivated by low interest rates.
The Zimbabwe National Chamber of Commerce chief executive, Chris Mugaga, concurred with Matsheza saying the rate adjustment was “commendable”.
“It is the proper thing to do when inflation is rising. The situation we had before where interest rates were trailing inflation was promoting disintermediation when we have been trying to promote intermediation.“We know that speculative borrowing has been all the rage and it is a disruption that leads to currency heating with a number of people borrowing to finance activity on the parallel market.
“We also needed the hike to deliver on a positive real interest rate, which will be an incentive for savings,” Mugaga said, adding that the monetary authority now needs to make sure that banks strengthen their KYC “so that speculative borrowing can, in the future, be controlled through due diligence as opposed to policy adjustments”.
IH Securities (IH), a local research firm, however, warned that the rate adjustment’s impact on savings could compromise the apex bank’s monetary targeting.
“There is a clear focus to slow M1 money to restrict inflation growth and debuttress ‘fuel’ into the parallel market, however, downside risk remains the inevitable growth in broad money as banks ramp up lending.”
A global think-tank is forecasting that the reserve bank will institute a series of rate cuts from next year, as inflation is seen moderating.
“We expect the RBZ to institute a series of rate cuts from 2022 as inflation continues to moderate and monetary policymaking normalises. We forecast that annual average inflation will remain on a downtrend while remaining at double-digit levels until 2023, and expect that the RBZ will seek to boost access to credit and thus stimulate economic activity,” Fitch Solutions (Fitch) said in a note recently.
Meanwhile, other resolutions from the MPC meeting were to maintain current levels of statutory reserve requirements, minimum deposit rates for ZW$ savings and time deposits, as well as reserve money growth targets.
“The committee noted with satisfaction that the previous monetary policy decisions had helped to stabilise the exchange rate and domestic prices,” Mangudya said.
“It was expected that month-on-month inflation would continue declining to low and sustainable levels in the outlook period. It was also expected that annual inflation would end the year 2021 at between 58 percent and 60 percent and at less than 20 percent in 2022,” the governor added.
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