RBZ Keeps Policy Rate Unchanged

THE Reserve Bank of Zimbabwe (RBZ) has kept the bank policy and medium term lending rates at 35 and 25 percent, respectively, while maintaining a stranglehold on money supply to entrench prevailing price stability.

RBZ Governor Dr Mangudya said in a statement, the bank was happy with prevailing price stability following the introduction of the foreign currency auction system, which has spurred local production of goods.

In terms of the bank policy rate, Dr Mangudya is on record saying the monetary authorities will not tamper with the current interest rate set up to avoid tinkering that could upset prevailing stability.

The bank policy rate currently stands at 35 percent, after it was more than doubled from 15 percent in October 2019.

The policy rate or overnight accommodation rate had earlier been increased from 15 percent to 50 percent in June 2019 and then 70 percent in October 2019, before the rate was cut to 35 percent.

The medium term facility rate relates to the $2,6 billion productive sector funds the bank announced in August 2020, for disbursement to banks on-lend to various productive sectors of the economy.

In October 2020, the RBZ approved an additional $2,5 billion under the bank’s medium-term lending facility to support the productive sectors of the economy, following the fallout from the Covid-19 pandemic.

The decision on rates was taken by the bank’s Monetary Policy Committee (MPC) at its meeting on December 18, 2020, resolving also that the next post-festive season forex auction will be on January 12, 2021.

The bank said it was pleased with the manner the market had embraced the foreign exchange auction system, resulting in price stability prevailing, since the commencement of the auction system in June 2020.

The economy has, as a result of the auction system and other supportive measures taken by the Government and the bank, witnessed an increase in the production of goods and services across most of the productive sectors, especially during the third and last quarters of this year.

“As we journey into 2021, the Bank would like to assure the public that the foreign exchange auction system shall continue to be the anchor for the management of foreign currency in Zimbabwe and price and financial system stability shall

remain the primary focus of the Bank,” Dr Mangudya said.

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