Zimbabwe’s central bank cut its benchmark interest rate for the first time since becoming the world’s most aggressive monetary authority in June on expectations that a downward trend in inflation will continue.
The monetary policy committee lowered the rate to 150% from 200%, Reserve Bank of Zimbabwe Governor John Mangudya said in a statement Thursday, making it the second central bank on the continent after Angola to lower borrowing costs this year.
“The moderation in interest rates is important and necessitated by the downward trend in the month-on-month inflation since the last quarter of 2022. The bank expects the downward trend in inflation to continue into 2023.” Reserve Bank of Zimbabwe Governor John Mangudya.
Monthly inflation slowed from 12.4% in August to 1.1% in January and has been below the 3% target since November. Annual price growth slowed for a fifth straight month in January to 230%.
Drastic measures since June, including raising interest rates to a record, selling gold coins and easing controls over the foreign-exchange market to deal with a widening gap between the official and unofficial rate, have helped contain surging inflation and initially stabilized the nation’s tumbling currency.
The Zimbabwean dollar has depreciated 15% against the US currency this year to trade at Z$801 on the official market. That compares with Z$ 1,000 on the black market.
To halt its slide and prevent it from seeping into inflation, the central bank said it would focus on smoothening exchange-rate shocks through regular foreign currency sales to banks from the surrender portion of foreign-exchange receipts.
Read also; Zimbabwe to Introduce New Gold Coin as Hedge Against Inflation.
