BUSINESS REPORTER
The Reserve Bank of Zimbabwe (RBZ) is tightening monetary policy by reducing the reserve money growth target to 20% per quarter among a raft of measures as it eyes an annual inflation rate of below 25% by December, Business Times can report.
The reserve money growth target was 22.5%.
In an update after Monday’s Monetary Policy Committee (MPC) meeting, RBZ governor John Mangudya (pictured) said the committee was pleased with the current disinflationary trajectory which has seen annual inflation falling to 106.6% in June from 161.9% in May.
“The bank expects annual inflation to decline to 55% by end July 2021 and to below 25% by December 2021,” Mangudya said.
He said the MPC resolved to maintain the bank policy rate at 40% and the interest rate on the Medium Term Accommodation Facility at 30% per annum.
He said the bank will continue to review the reserve money growth target to achieve and maintain stability of inflation and the exchange rate in line with “developments in other macroeconomic fundamentals”.
Mangudya said the RBZ will streamline the foreign currency auction system to reflect macroeconomic fundamentals and ensure that the country’s productive sector is given priority in terms of allotment.
He said the RBZ was exploring mechanisms to protect foreign currency deposits in consultation with the Deposit Protection Board. Foreign currency deposits in the banking sector stands at US$1.3bn.
“Consultations are also ongoing to encourage banks to leverage on the foreign currency deposits to enhance financial intermediation for the benefit of the economy,” Mangudya said.
