RBZ unrelenting on tight monetary stance

PHILLIMON MHLANGA IN VICTORIA FALLS
The Reserve Bank of Zimbabwe (RBZ) is unrelenting in its tight monetary policy stance, signalling no immediate relief from high interest rates as authorities dig in to contain inflationary pressures and shield the Zimbabwe Gold (ZiG) from fresh instability.
The central bank says it will remain unyielding in its policy posture, underscoring a hardline commitment to price stability even as businesses grapple with rising borrowing costs and constrained liquidity.
Speaking at the ongoing Insurance and Pensions Symposium in Victoria Falls, RBZ Deputy Governor Innocent Matshe reinforced the central bank’s determination to stay the course.
“The RBZ is unrelenting with the tight monetary stance, because it is appropriate for the conditions that we are facing,” Dr Matshe said.
His remarks reinforce a clear policy signal, despite growing calls from business for relief, the central bank is not prepared to ease until it is convinced inflation risks have been decisively neutralised.
At the heart of the RBZ’s strategy is its benchmark lending rate, which has been held at 35% since September 2024, one of the highest in the region. The rate has become a key anchor in the authorities’ bid to stabilise prices and restore confidence in the Zimbabwe Gold (ZiG) currency following years of volatility.
Yet, the inflation battle is proving far from over.
Latest data from ZIMSTAT shows annual ZiG inflation edged up to 4.4% in March, driven largely by rising food and transport costs, a development that underscores the fragility of recent gains.
Dr Matshe warned that global shocks, particularly geopolitical tensions in the Middle East, continue to pose upside risks to inflation, complicating the policy outlook.
“What conditions are those? Inflationary pressures still need to dissipate. But unfortunately, because of the geopolitics that we have seen with the Middle East war, we have to maintain the stance that we have,” he said.
The reference to geopolitical tensions highlights the RBZ’s growing concern over imported inflation, particularly through energy prices.
Any sustained increase in global oil prices could quickly filter into domestic costs, placing renewed pressure on the ZiG and consumer prices.
For businesses, the implications are immediate and severe.
A prolonged period of elevated interest rates is likely to tighten liquidity conditions, constrain credit growth, and weigh on investment, raising fears of a slowdown in economic activity.
However, Dr Matshe signalled that the central bank is alive to the growth risks and will recalibrate policy when conditions allow.
“However, when the time comes, when these pressures start dissipating, there will be signals for loosening monetary policy in order to make sure that we don’t drift into low growth levels,” he said.