The central bank authority of Zimbabwe intends to double the standard interest rate to a whopping 190%. The monetary policymakers plan to handle inflation through the highest world interest rate.
Persistence Gwanyanya, a member of the monetary policy-making committee, explained the intention behind the move. They wish to achieve a positive real interest rate to avert proposed borrowings that undermine the local currency. On Saturday, the official figures indicated that annual inflation rose to 191.6% in June 2022.
According to President Emmerson Mnangagwa, his government shall reveal measures to impede inflation and the surging price of essential commodities. However, he did not provide any other detail. On June 17, the central bank banned banks from lending below the authorized rate of 80% from July 1.
As per their website, the MPC met last Friday. According to Gwanyanya, the country can achieve composure only through an aggressive monetary policy. Moreover, only agricultural production will be eligible for concessionary interest rates.
The central bank shall also increase the deposit rate to assure that banks compensate depositors for their savings. The central bank’s inflation perspective has been modified upward to 160% by year-end from an initial prediction ranging between 25% and 35%. “It will be above 100%, mostly reflective of the external shocks we have experienced as an economy,” Gwanyanya said.
Furthermore, the Zimbabwe central bank cut the growth forecast to 3.5% from 5.5%. However, MPC does not propose price control for businesses due to a surge in essential goods.