to support economic activityThe Central Bank (CB) said the credit supply to the private sector, in absolute terms, has contracted during the first four months of the year and decelerated significantly on a year on year basis by April 2009.
According to the CBs Monetary Policy Review released this week, the CB said it has taken several monetary policy measures during the year and that financial markets are yet to fully adjust to the policy measures.
The Monetary Policy Review stated that the Monetary Board of the CB decided to further relax its monetary policy stance by reducing the policy interest rates of the CB by 50 basis points each. It said the CB’s repurchase rate is 8.50 % and the reverse repurchase rate is 11% with immediate effect.
The CB expects the reduction of its policy rates to help ease conditions in domestic credit markets further and bring down market interest rates, facilitating an increased flow of credit.
The CB said the benign inflation environment has enabled it to pursue a policy path that is more supportive of economic activity during 2009 to date. “The renewed business confidence and investor perceptions along with reconstruction and development work already embarked on in the newly liberated areas is expected to generate new economic activity,” it said.
According to the CB, today’s monetary policy decision will support such economic activity.
The CB further stated that inflation increased marginally to 3.3% in May 2009 as expected to account for the upward revisions to some administered prices.
Although year on year inflation is projected to pick up gradually during the second half of the year from the current low levels, the CB expects inflation to remain at single digits during the remainder of the year as well as next year. |
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