‘2024/25 Monetary Policy stance relatively tight’
TANZANIA: THE Bank of Tanzania (BoT) has said the stance of Monetary Policy for 2024/25 will be relatively tight, responding to the path-through effects of the recent exchange rate depreciation and high oil prices on inflation.
The Central Bank said in its latest Monetary Policy Statement (MPS) that it will execute this policy stance using the interest rate based monetary policy framework. I
n line with this, the Bank will review the Central Bank Rate (CBR) on a quarterly basis and use monetary policy instruments to steer the 7-day IBCM rate close to the CBR.
The MPS report said the interest rate-based Monetary Policy Framework is expected to guide interest rate determination and improve monetary policy transmission.
Against this backdrop, BoT will continue engaging stakeholders in implementing reforms in the financial sector, as well as enhancing consumer protection, financial literacy and financial inclusion.
“The interest rates will continue to be determined by market forces,” the Central Bank said in its latest MPS.
The MPS report said further that the monetary policy will continue focusing on achieving the inflation target of 5 per cent and facilitating the economic growth of 5.4 per cent in 2024 and 5.8 per cent in 2025 for Mainland Tanzania, and 7.2 per cent and 6.8 per cent for Zanzibar.
Meanwhile, the Bank will enhance public awareness of the interest rate-based monetary policy framework, issue quarterly Monetary Policy Committee (MPC) reports, MPC statements, and publish the MPC Meeting Calendar.
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In addition, the bank will continue implementing reforms in the financial sector, including measures to enhance efficiency in the distribution of liquidity amongst banks, financial stability, and inclusion.
These measures are expected to help improve monetary policy transmission and effectiveness.
The exchange rate will continue to be market-determined and a primary means of insulating the economy from external shocks.
BoT will participate in the Interbank Foreign Exchange Market (IFEM) in accordance with the Foreign Exchange Intervention Policy.
To improve trading activity in the market and ensure orderly conditions, participants shall adhere to the IFEM Code of Conduct.
In addition, the Bank of Tanzania shall continue to maintain adequate foreign reserves as a buffer against external shocks.
The ongoing implementation of the measures to address the foreign currency shortage is expected to ensure the adequacy of foreign reserves.
Furthermore, the easing of monetary policy in advanced economies is expected to increase foreign currency liquidity, especially the US dollar, thereby reducing pressures on foreign reserves and exchange rate.
