The decision of the monetary policy is done after a stakeholders meeting
every three months and this is the third time the two policy rate
indicators was also pegged on the same rate.

RBM Governor Dr Dalitso Kabambe said MPC) met on 25th and 26th September 2018, to review the global and domestic economic developments and resolved to keep the policy rate unchanged at 16.0 percent and Liquidity
Reserve Requirement (LRR) at 7.5 percent.

Kabambe, who also chairs the MPC,  said the Committee noted that risks
to the inflation outlook still persist on account of further increases
in administered prices, higher food and global oil prices and  increased
public sector financing requirements.

He said Inflation in the remainder of 2018 is projected to remain above
the medium term objective on account of these perceived risks.

“The MPC therefore considered that maintaining the Policy rate at 16.0
percent will ensure that the policy stance remains adequately tight to
manage these risks and ensure that inflation declines gradually towards
the medium-term inflation objective of 5.0 percent,” he said.

He added that headline inflation is still in single digit but and
averaged 9.1 percent during the second quarter of 2018, 0.5 percentage
points higher than what was reported during the first quarter of 2018.

“During the third quarter inflation is expected to pick up to 9.3
percent on account of materialized upside risks that were foreseen
during the second MPC of 2018. ”

He said the impact of these risks has, however, been subdued by the
tight stance of monetary policy.

“Inflation edged up to 9.3 percent in August 2018 from 8.6 percent in
June 2018. In the short term, inflation is expected to remain slightly
elevated, albeit transitory, on account of seasonal factors, utility
tariff shocks, pump fuel price pressures as well as rising public sector
financing requirements.

“This notwithstanding, average inflation for 2018 and 2019 is projected
at 9.3 percent and 9.6 percent, respectively.”

Kabambe said Global and Domestic Output Developments Prospects for
global economy remain robust with output expected to grow by 3.9 percent
in 2018 and 2019. Advanced economies’ growth is expected to remain at
2.4 percent in 2018 before slowing down to 2.2 percent in 2019.

“Recovery in the Sub-Saharan Africa is set to continue, supported by the
rise in commodity prices. Global oil prices have moderated slightly, but
remain elevated. Turning to the domestic front, the economy is expected
to grow by 4.0 percent in 2018, 1.2 percentage points lower than 5.2
percent growth registered in 2017, on account of weak agricultural
performance.

“The unsatisfactory agricultural performance has affected availability
of maize and other food items which is likely to exert upward pressure
on food prices.”

On exchange rate, Kabambe said it continues to be stable supported by
adequate foreign exchange reserves coupled with tight liquidity conditions.

He said gross official reserves remained above the targeted 3 months of
import cover, saying as at end of August 2018, the gross official
reserves were at 3.6 months of imports.

“The stable exchange rate is expected to anchor inflation expectations
in the short to medium term. Maintaining policy rate at 16.0 percent is
expected to reduce the impact of upside risks and inflation is projected
to remain elevated in the coming months before falling back gradually.

The Committee decided that maintaining the current policy stance will
help in containing  pressures and directing inflation towards the medium
term objective of 5 percent.