Zimbabwe’s central bank lowered its policy rate for the second time this year and for the third time in the current easing cycle to ensure the country’s economy remains on a path toward grow amid the impact of the Covid-19 pandemic.
The Reserve Bank of Zimbabwe (RBZ) cut its policy rate by another 10 percentage points to 15.0 percent and has now cut it by 20 percentage points this year following a similar-sized cut in March.
Since November 2019, when RBZ halved its policy rate to 35.0 percent from 70.0 percent, the rate has now been cut by 55 percentage points in three steps.
“The MPC (monetary policy committee) noted the compelling need to reinforce the bank’s first round of economic policy responses to the Covid-19 pandemic,” RBZ said in a statement that was released on April 29 following a meeting of its policy committee on April 24.
In addition to the cut to the policy rate, which will take effect on May 1, RBZ said the interest rate on its medium-term bank accommodation facility will be lowered to 10 percent from 15 percent while the size of the facility has been increased by another 500 million Zimbabwe dollars to 3 billion.
In March, when RBZ cut its policy rate by 10 percentage points, RBZ lowered the statutory reserve ratio by 50 basis points to 4.5 percent and added 1 billion Zimbabwe dollars to the medium term accommodation facility to a total of 2.5 billion.
That same month RBZ raised its policy rate, the overnight lending rate, to 70 percent from 50 percent to curb rising inflation and support the Zimbabwe dollar, which was reintroduced last year.
The Reserve Bank of Zimbabwe issued the following statement:
- The Bank Policy rate will be reviewed downwards from 25% to 15% per annum with effect from Friday, 1 May 2020, with the expectation that banks will do the same to provide affordable financial facilities to their customers during these challenging times.
- b) The interest rate applicable to the Medium-Term Bank Accommodation (MBA) Facility will be reduced from the current 15% to 10% per annum with effect from Friday, 1 May 2020.
- c) The MBA Facility has been increased by ZW$500 million to bring it to ZW$3 billion.
- d) An additional ZW$2 billion will be raised from the market through money supply neutral financial instruments to augment the MBA Facility to ZW$5 billion.
- e) Banks that access the MBA Facility are encouraged to on-lend at interest rates not exceeding 20%.”
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