The central bank maintained its policy rate at the same level as February 2018, saying its line with its goals of supporting economic growth and keeping inflation within target levels.
The central bank rate was kept unchanged at 9%. According to the monetary policy statement issued by the bank, the risks to inflation – which is currently at its lowest levels in years – are balanced, although it could rise gradually in the next few months.
The economy has also recovered from 2016’s downturn, the statement said. Recent quarterly GDP data from the bureau of statistics indicates that real economic growth in 2017 was 6.3% compared to 3% in 2016. Growth was recorded across all sectors, unlike 2016 when output in the agriculture sector declined.
The Bank says its composite index of economic activity – its high frequency indicator of real economic activity – points to a “relatively robust economic growth” in the current financial year. GDP growth from July 2017 to the end of this February is estimated at about 6.4%, according to the index.
In addition, the bank sees the economy expanding at an average rate of 6.5% in the next three years on the back of favourable external factors, strong private and public investments, improved agricultural productivity, and a stable macroeconomic situation. The risks to this outlook, the statement said, include government spending – which could see it borrow more, including domestically thus crowding out the private sector – and weak private sector growth.
With inflationary pressures contained and the economy growing at a trot, the Bank believes its necessary to maintain its benchmark rate at 9%, its lowest level ever. In February, when it was cut by 0.5%, the concern was sluggish private sector credit growth and the cost of loans – concerns still present today.
The band on the CRB was maintained at +/-3% and the margin on the rediscount rate at 4% on the CBR. The rediscount rate and the bank rate were reduced by 0.5% to 13% and 14% respectively.