POSSIBLE REPO RATE CUTS AMID STEADY INFLATION

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POSSIBLE REPO RATE CUTS AMID STEADY INFLATION
POSSIBLE REPO RATE CUTS AMID STEADY INFLATION

Africa-Press – Eswatini. The steady inflation rate for May and April has brought some hope for a possible cut in the interest rates in the upcoming months.

Eswatini and South Africa’s consumer inflation for May remained unchanged at 4.1 and 5.2 per cent year-on-year. That was in line with analysts’ forecasts. Economist Sanele Sanele Sibiya said the unchanged inflation rate for the past two months meant that the prices for food in the shops had not increased at the faster rate as they did in the past, hence the inflation rate remained at 4.1 per cent.

It is worth noting that other factors contributing to the increase of inflation rate, which include fuel cost, had also declined for two consecutive times in the past months. It is also projected that even in July; the cost of fuel might also decline. The economist said all these dynamics were pointing to possible interest rate cuts. The cut in interest rates would be a relief to the already financially burdened consumers as the prime lending rate they paid for their loans would be eased from the current 11 per cent. The cut in repo rate would also encourage more lending by businesses for their growth as they (businesses) were currently not taking more loans due to the high prime lending rate. Currently, Eswatini’s interest rate stands at 7.50 per cent and it has been kept there since last year July.

Kept

The Monetary Policy Consultative Committee (MPCC) has sat for three times now since the beginning of the year they have kept the repo rate unchanged. Local and international economists had projected interest rate cuts in the second half of the year, of which begins in the upcoming month. The next MPCC meeting is scheduled to take place on July 19, where the Central Bank of Eswatini (CBE) Governor, Dr Phil Mnisi, will announce the next monetary policy stance.

When delivering his monetary policy statement on May 31, the governor said the bank will continue to monitor international, regional and domestic developments that influence the movements of domestic inflation and will act appropriately in line with its mission to foster price and financial stability that is conducive to the economic development in Eswatini.

However, the International Monetary Fund (IMF) has warned that even though inflation trends were encouraging, central banks should avoid cutting interest rates too early and should remain vigilant as upside risks to the inflation outlook persist.

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