CBL sets policy rate
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.
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CBL Governor Retšelisitsoe Matlanyane.