Africa-Press – Eswatini. Interest rates are gearing up for another sharp and regular fluctuation, ministry of economic planning and development warns, as uncertainty stemming from escalating global tensions throws shadows over the economic landscape.
The ministry’s recently issued economic bulletin underscores the potential for these tensions to ignite increases in basic commodity prices such as food adds fuel to the inflation fire, pushing borrowing costs onto a potential tightening spree in the near future, in the medium term..
This volatility in interest rates, the bulletin says, stems from rising tensions between major powers, simmering conflicts and potential disruptions to trade create significant uncertainty, making investors restless.
The bulletin states that the recent meeting of the Monetary Policy Consultative Committee (MPCC) did not make any adjustments to the existing monetary policy strategy.
The discount rate, which is the rate at which commercial banks borrow from the central bank, stood at 7.5 per cent, while the prime lending rate, which is the benchmark rate for commercial banks’ loans to their customers, stayed at 11 per cent.
This indicates that the key interest rates, which influence borrowing and lending within the economy, remained the same.
“The MPCC opted to hold the monetary policy stance unchanged, on account of relatively easing domestic inflationary pressures,” said the ministry.
According to an economist who weighed in on condition of anonymity, the decision to maintain the status quo was primarily driven by a recent softening in inflation within the country.
Prices
“This means that prices, on average, haven’t been rising as quickly as they were previously. This is generally viewed as a positive sign for economic stability and consumer spending power,” he said.
The economist added that by keeping the interest rates steady, the MPCC essentially aimed to achieve a balance.
“On the one hand, they want to ensure that economic activity doesn’t become overheated, which could lead to higher inflation down the line. On the other hand, they don’t want to stifle growth by making borrowing too expensive,” said the economist.
He said it was important to note that this was just a snapshot of the current situation, adding that economic conditions could change quickly, and the MPCC would likely reassess its policy stance at regular intervals, taking into account the latest data and forecasts.
“They may decide to raise or lower interest rates in the future, depending on how inflation and other economic indicators evolve,” said the economist.
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