RBZ cuts rate for the 2nd time in 2020 to ensure growth

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Central Bank News

Zimbabwe’s central bank lowered its policy rate for the second time this year and for the third time in the current easing cycle to ensure the country’s economy remains on a path toward grow amid the impact of the Covid-19 pandemic.

The Reserve Bank of Zimbabwe (RBZ) cut its policy rate by another 10 percentage points to 15.0 percent and has now cut it by 20 percentage points this year following a similar-sized cut in March.

Since November 2019, when RBZ halved its policy rate to 35.0 percent from 70.0 percent, the rate has now been cut by 55 percentage points in three steps.

“The MPC (monetary policy committee) noted the compelling need to reinforce the bank’s first round of economic policy responses to the Covid-19 pandemic,” RBZ said in a statement that was released on April 29 following a meeting of its policy committee on April 24.

In addition to the cut to the policy rate, which will take effect on May 1, RBZ said the interest rate on its medium-term bank accommodation facility will be lowered to 10 percent from 15 percent while the size of the facility has been increased by another 500 million Zimbabwe dollars to 3 billion.

In March, when RBZ cut its policy rate by 10 percentage points, RBZ lowered the statutory reserve ratio by 50 basis points to 4.5 percent and added 1 billion Zimbabwe dollars to the medium term accommodation facility to a total of 2.5 billion.

In September 2019 Zimbabwe’s finance minster set up the central bank’s 9-member monetary policy committee to help stabilize the country’s economy and move toward inflation targeting as a monetary policy framework.

That same month RBZ raised its policy rate, the overnight lending rate, to 70 percent from 50 percent to curb rising inflation and support the Zimbabwe dollar, which was reintroduced last year.