Home World News Emerging Markets Tanzania policy rate pegged at 5.5 percent in new monetary policy

Tanzania policy rate pegged at 5.5 percent in new monetary policy

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Photo taken on Sept. 3, 2019 shows the Mwalimu Nyerere Foundation Building built by China Railway Construction Engineering Group in Dar es Salaam, Tanzania. Tanzanian President John Magufuli and Ugandan President Yoweri Museveni on Friday inaugurated the Mwalimu Nyerere Foundation (MNF) Building built by China Railway Construction Engineering Group (CRCEG). (Xinhua)
(Xinhua)

Tanzania’s central bank on Friday officially launched an interest rate-based monetary policy framework and set a new policy rate at 5.5 percent for the first quarter of 2024.

Launching the policy in Tanzania’s commercial hub of Dar es Salaam, Emmanuel Tutuba, the governor of the Bank of Tanzania (BoT), said the central bank rate or policy rate considered the need to contain inflation within the medium-term target of 5 percent, while supporting economic growth to reach 5.5 percent or more in 2024 and ensuring the stability of the exchange rate.

He said BoT believes that the policy rate will guide financial institutions to implement their activities, including the determination of interest rates, thereby improving the transmission of monetary policy.

“It is worth noting that implementing monetary policy by using the central bank rate or policy rate does not entail capping interest rates on facilities offered by banks and financial institutions,” said Tutuba, adding that interest rates of facilities offered by banks and financial institutions will still be determined by the market.

“This is part of our reforms in the financial sector to improve the effectiveness of monetary policy,” he told chief executive officers of banks and financial institutions and various media outlets.

He said this is a forward-looking framework in which the central bank uses short-term interest rates to regulate money supply, adding that this framework in Africa is used by Rwanda, Kenya, Zambia, Uganda, Ghana and South Africa.

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