CTPD expects MPC to maintain policy rate at 9.25%

The Centre for Trade Policy and Development (CTPD) says it expects the Monetary Policy Committee (MPC) to either maintain the policy rate at 9.25% or reduce it.
Centre Researcher for Public Finance Mataa Wakumelo told Money FM News in a statement that this is in a quest to supplement efforts to curb the effects of COVID-19 on the economy, being put forth by Government through the Central bank.
“As the Bank of Zambia (BoZ) Monetary Policy Committee (MPC) sets to announce its monetary policy decision this Wednesday, the Centre for Trade Policy and Development (CTPD) expects the committee to either maintain the policy rate at 9.25% or reduce it,” he said.
Mr Wakumelo noted that inflation has continued to increase, rising to 15.8 percent in July from 14.0 percent in March and the Center remains cognizant of the fact that economic activity has continued to slow down on account of the prevailing Covid-19 pandemic due to disruptions in business operations.
“This is in the quest to supplement efforts to curb the effects of COVID-19 on the economy, being put forth by Government in general and BoZ in particular. While the Centre notes that inflation has continued to increase, rising to 15.8% in July from 14.0% in March, we remain cognizant of the fact that economic activity has continued to slow down on account of the prevailing COVID-19 pandemic. Disruptions in business operations due to the pandemic have continued to negatively impact on productivity and ultimately weigh on economic activity,” he explained.
He said this is also exacerbated by the persistent effects of load shedding, albeit rising production costs stemming from, among other factors, high energy and electricity tariffs costs as well as the sustained depreciation of the kwacha per dollar exchange rate.
Mr Wakumelo added that in view of the foregoing, the Centre has observed that the negative economic outlook on which the Monetary Policy Rate lowered in its last sitting has not registered any improvements in the period under review.
“Furthermore, it is our considered view that the significant part of the prevailing inflation is more premised on supply constraints than it is driven by demand pressures owing to the fact that private sector activity has continued to be stifled by liquidity constraints associated with higher debt service payments necessitated by the depreciation of the exchange rate over the review period. In view of the foregoing, we observe that the negative economic outlook on which basis, the MPC lowered the policy rate in its last sitting has not registered any improvements in the period under review,” he noted.
He further said that it is the Centre’s expectation that the committee relaxes its stance by either maintaining or reducing the policy rate.
“It is also our recommendation that the fiscal side doubles the effort to compliment the steps taken by the monetary authority to stimulate economic activity and minimize the anticipated negative impacts of COVID-19 on livelihoods,” Mr Wakumelo said.
The Bank of Zambia (BOZ) is tomorrow expected to announce the Monetary Policy Rate for the third quarter of the year.

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