BoT likely to hold benchmark rate at 6.0pc

DAR ES SALAAM: THE Bank of Tanzania (BoT) is expected to keep its Central Bank Rate (CBR) unchanged at 6.0 per cent after its Monetary Policy Committee (MPC) met on Wednesday, with an 88.8 per cent probability of a hold, according to the analysts.

The CBR, Introduced last January, has so far seen only one adjustment—a 50-basis-point hike in Q2 2024, before being held steady across four consecutive quarters.

Analysts say this reflects the BoT’s preference for continuity amid contained inflation, stable liquidity and solid credit growth.

“Headline inflation has averaged 3.17 per cent over the past three months, comfortably within the BoT’s target range,” said financial analyst Mr Kelvin Msangi:

“Core inflation trends are also stable, and there’s no immediate demand-driven pressure that would require policy action.”

Private sector credit expanded at an average of 14.7 per cent annually, with agriculture, trade and construction leading the uptake. Liquidity levels remained generally stable despite slight tightening among smaller banks in May, which BoT assessed as a temporary segmentation issue.

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The shilling experienced modest depreciation over the quarter, but not at levels that typically trigger rate intervention. Money supply (M3) growth stood at 13.7 per cent, supporting economic activity without creating overheating risks.

Globally, monetary policy is mixed.

According to the Council on Foreign Relations’ tracker, 21 central banks cut rates in June, 29 held and just four hiked. Easing in Europe was offset by neutral stances in North America and Asia, with Sub-Saharan Africa presenting a mixed picture.

“In this context, BoT’s decision to hold aligns with prevailing global sentiment and domestic fundamentals,” said Mr Msangi.

“There is a small chance of a hike if FX volatility worsens or interbank stress intensifies, but those risks remain limited for now.”

A continued hold would benefit banks by stabilising funding costs and supporting lending momentum, particularly in agriculture and trade. It also reinforces confidence in government debt markets, providing yield stability and planning certainty for investors and borrowers alike.

Mr Msangi said upcoming fiscal and external reviews—including the IMF Article IV consultation—will be key in shaping future policy direction, especially if BoT signals concern over inflation or liquidity tightening in its MPC statement.