CBL sets pol­icy rate

Lesotho Times - - Business - Retha­bile Pitso

THE Cen­tral Bank of Le­sotho (CBL) has set the newly-in­tro­duced CBL Rate at 6.25 per­cent to align the cost of bor­row­ing and lend­ing with the re­gion.

Ad­dress­ing a news con­fer­ence on Tues­day, CBL Gov­er­nor Retšelisit­soe Mat­lanyane said the apex bank’s Mon­e­tary Pol­icy Com­mit­tee (MPC) pegged the rate 6.25 per­cent af­ter con­sid­er­ing Net In­ter­na­tional Re­serves (NIR) de­vel­op­ments and out­look, re­gional in­fla­tion and in­ter­est rate out­look, do­mes­tic eco­nomic con­di­tions and the global eco­nomic out­look.

“Hav­ing con­sid­ered all th­ese fac­tors, the MPC de­cided to set the newly-in­tro­duced CBL Rate at 6.25 per­cent. At this rate, the do­mes­tic cost of bor­row­ing and lend­ing will be aligned with the cost of funds else­where in the re­gion,” said Dr Mat­lanyane.

“This align­ment is im­por­tant in en­sur­ing that the pol­icy rate is used as a ref­er­ence for com­mer­cial banks when set­ting their in­ter­est rates. Fur­ther­more, this rate will ul­ti­mately as­sist in the man­age­ment of the ex­cess liq­uid­ity cur­rently pre­vail­ing in the sys­tem.”

She noted that while price sta­bil­ity was the CBL’S pri­mary man­date, it had to be un­der­pinned by the main­te­nance of a level of re­serves that would en­able an ex­change of one loti for one rand.

“Af­ter tak­ing into con­sid­er­a­tion the var­i­ous de­mand and sup­ply fac­tors that in­flu­ence the NIR level, the NIR tar­get floor has been re­vised down­wards from US$710 mil­lion (about M1.01 bil­lion) to US$635 mil­lion for the first quar­ter of 2016, and at this level the NIR is con­sid­ered ad­e­quate/suf­fi­cient to sup­port the ex­change rate par­ity be­tween the loti and the South African rand and there­fore to pre­serve the price sta­bil­ity,” Dr Mat­lanyane said.

The NIR po­si­tion, she said, re­mained above the tar­get floor of US$710 mil­lion. “In terms of the out­look, the NIR po­si­tion is pro­jected to re­main above the new tar­get floor of US$635 mil­lion for the en­tire fore­cast­ing hori­zon of three quar­ters, with cycli­cal peaks and troughs at the be­gin­ning and end of ev­ery quar­ter, re­spec­tively. Con­se­quent to the cycli­cal pat­tern, the po­si­tion is en­vis­aged to de­cline in Fe­bru­ary and

March 2016, but still close the quar­ter above the tar­get floor,” said Dr Mat­lanyane.

The CBL boss also noted that do­mes­tic in­fla­tion­ary pres­sures in­creased, with the an­nual rate of con­sumer in­fla­tion ris­ing from 2.9 per­cent in June to 3.8 per­cent in Septem­ber 2015.

“This was largely driven by both food and non-al­co­holic bev­er­ages com­po­nents. Price de­vel­op­ments in Le­sotho are ex­pected to con­tinue to move in line with those in SA over the medium-term be­cause of trade re­la­tion­ships be­tween the two coun­tries.

“On the out­look, the risks in­clude the weak ex­change rate of the rand (hence the loti) against the ma­jor trad­ing part­ners’ cur­ren­cies,” she said.

Dr Mat­lanyane fur­ther noted that while in­ter­na­tional food prices were ex­pected to sta­bilise, weather-re­lated risks to crops pro­duc­tion height­ened by drought con­di­tions were likely to ex­ert up­ward pres­sure on both re­gional and do­mes­tic food prices.

She also touched on money sup­ply, say­ing it ex­panded by 6.1 per­cent dur­ing the third quar­ter fol­low­ing a con­trac­tion of 0.4 per­cent in the se­cond quar­ter.

Con­tin­ued on page 18. . .

CBL Gov­er­nor Retšelisit­soe Mat­lanyane.

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