Malawi May Cut Rates as Inflation Slows

Malawi’s central bank has said it may cut interest rates at its next policy meeting after inflation eased for a second consecutive month.

Deputy Governor Kisu Simwaka said on Wednesday that the recent slowdown in price growth had created room for a possible reduction in the policy rate.

Consumer inflation slowed to 26.0 percent year on year in December, down from 27.9 percent in November, according to official data.

“We are seeing clear signs that inflation has turned the corner and is heading in the right direction,” Simwaka said in a post on his Facebook page.

He added that the continued decline in inflation had “opened the door to a possible policy rate reduction”.

Simwaka said that, in the absence of immediate upside risks, a rate cut could help support economic growth without fuelling inflation.

He noted that the Monetary Policy Committee would review recent inflation data, forecasts and risks to the outlook at its next meeting.

“In the context where no immediate upside risks are evident, reducing the policy rate could support economic growth without igniting inflationary pressures. At its upcoming meeting, the Monetary Policy Committee will assess progress based on inflation outcomes, inflation forecasts, and balance of risks around the inflation outlook,” he added.

The Reserve Bank of Malawi has kept its key policy rate at 26 percent since February 2024 as part of efforts to rein in high inflation.

Malawi, a donor-dependent economy in southern Africa, has faced prolonged economic difficulties marked by high inflation, foreign exchange shortages and weak growth.

President Peter Mutharika, who returned to office after last year’s elections, has pledged to stabilise the economy and restore growth.