INTEREST RATE REMAINS UNCHANGED FOR 6TH TIME

MBABANE – The Central Bank of Eswatini (CBE), on Friday decided to keep interest rate unchanged at 7.50 per cent for the sixth consecutive time to tame inflation.

The monetary policy statement was released by the CBE Governor Dr Phil Mnisi on Friday. In his statement, the governor stated the bank, together with the Monetary Policy Consultative Committee (MPCC) held a meeting to consider the appropriate monetary policy stance. He said taking into consideration relevant global, regional and domestic economic factors; as well as the price and financial stability mandate, the bank decided to maintain the discount rate unchanged at 7.50 per cent. This means that banks normally are expected to maintain the;
prime lending rate on loans extended to individuals and businesses at 11.0 per cent until the next monetary policy meeting which will be held in September.

Simply put, a prime rate or prime lending rate is an interest rate used by banks, usually the interest rate at which banks lend to customers with good credit. Some variable interest rates may be expressed as a percentage above or below prime rate. The governor stated that the CBE expects the cost of goods and services to increase moderately in 2024. The CBE revised its inflation forecasts for 2024 to 4.4 per cent (from 4.5 per cent forecasted in May 2024.

He said the bank will continue to monitor international, regional and domestic developments that influence its monetary policy and will act appropriately in line with its mandate.
He said on the global front, the International Monetary Fund (IMF) forecasts global growth at 3.2 per cent for 2024 and 3.3 per cent for 2025. He said the growth forecast for advanced economies is steady at 1.7 per cent for 2024 and 1.8 per cent for 2025, while for emerging markets and developing economies, the forecast was revised up marginally to 4.3 per cent for both 2024 and 2025.

Dr Mnisi said the forecast for global inflation remained unchanged at 5.9 per cent for 2024 and revised downward for 2025 to 4.4 per cent. Risks to global inflation remain elevated and include price pressures emanating from renewed trade or geopolitical tensions. Monetary policy conditions at global level remain at restrictive levels with slight divergences as some central banks have begun easing including the European Central Bank, which reduced interest rates by 25 basis points.

He added that on the regional front, the South African economy contracted by 0.1 per cent in the first quarter of 2024 from 0.3 per cent rise in the previous quarter, dragged lower by manufacturing, mining and construction while agricultural activity grew sharply. He mentioned that the South African Reserve Bank (SARB) revised down its growth forecast for 2024 to 1.1 per cent (from 1.2 per cent forecasted in May), while the forecasts for 2025 and 2026 were both revised up to 1.5 per cent and 1.7 per cent, respectively.  ‘‘Statistics South Africa reports that inflation was steady at 5.2 per cent in May 2024, the same as the previous month. The SARB revised down its inflation forecast for 2024 to 4.9 per cent (from 5.1 per cent) and 4.4 per cent (from 4.5 per cent) for 2025.

‘‘The forecasts for 2026 was left steady at 4.5 per cent. The SARB maintained the repo rate unchanged at 8.25 per cent in its July 18, 2024 meeting. ‘‘Domestically, economic activity as measured by the quarterly gross domestic product grew by 7.0 per cent year-on-year (seasonally adjusted) in the fourth quarter of 2023 following a revised growth of 6.8 per cent in the third quarter. The primary sector contracted by 5.8 per cent in the fourth quarter of 2023 compared to a 1.0 per cent growth in the previous quarter. ‘‘The contraction was due to a decline in forestry and animal production. The secondary sector contracted by 1.5 per cent in the fourth quarter of 2023 from a growth of 1.6 per cent in the third quarter, while the tertiary sector grew by 11.9 per cent in the fourth quarter of 2023 following a 11.6 per cent growth in the previous quarter.

‘‘The country’s annual consumer inflation increased to 4.4 per cent in June 2024 from 4.1 per cent the previous month. Increases were observed in the price indices for; ‘transport’, which increased by 0.7 per cent to record 2.7 per cent in June 2024 and ‘food’, which increased to 4.1 per cent during the month under review, from 3.6 per cent in the previous month. ‘‘Additional inflationary pressures emanated from the price indices for ‘alcoholic beverages and tobacco’ and ‘restaurants and hotels’, which rose by 2.0 and 3.9 per cent, respectively,’’ read the statement.  He said on the contrary, decreasing rates of growth were noted in the price indices for ‘clothing and footwear’ and ‘household furniture and maintenance’, which fell by 1.3 and 0.3 per cent. He added that the bank revised down its headline inflation forecasts to 4.4 per cent (from 4.5 per cent forecasted in May 2024) for 2024, 5.02 per cent (from 5.13 per cent) for 2025. He said the forecast for 2026 was left unchanged at 4.92 per cent.

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