Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) says knee-jerk reduction of the interest rates can have dire effects if unforeseen circumstances trigger another wave of depreciation.
In economic terms, a bank policy rate or key interest rate is the benchmark interest rate set by a central bank to implement its monetary policy and influence the overall economy. It is the rate at which the central bank sets and is used to peg onward lending by financial institutions.
Since the inception of the ZWG currency in April 2024, the RBZ has maintained a policy rate of 35%, deemed too high in the Southern Africa region where most central banks maintain an average of 6, 75%.
Captains of Industry have since ringed the alarm bell urging the central bank to ease the interest rates to unlock cheaper capital for purposes of productive support. More recently, a section of society quizzed the central bank on why it was reluctant to at align the interest rate to annual inflation which has since entered the single digit margins.
But presenting the 2026 Monetary Policy Statement (MPS) Friday, RBZ governor John Mushayavanhu defended the current high rate arguing that it had engendered a progressive disinflation trajectory and delivered a single digit inflation starting in January 2026.
He said the tactic of taking time to adjust the interest rates is also in sync with regional and global best practices where several central banks try to create a buffer to absorb risks which may recur when the exchange rates unexpectedly rescind.
“It is however, critical that the Reserve Bank remains cautious to avoid the premature easing of monetary policy and risk reversing the gains on the inflation front.Any renewed inflation pressures have the potential to induce policy reversals, including necessitating an even more aggressive tightening , with higher economic and social costs,” he said.
Mushayavanhu said in order to strike a balance between price stability and economic growth , the RBZ will follow a gradual and cautions stepwise policy adjustment path which will be data dependent .
The cautious approach, he said recognizes that the economy is in the early stages of a low and delicate inflation environment, achieved after prolonged periods of high inflation and currency instability, stretching over three decades.
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“In this context, the Reserve Bank has maintained a bank policy rate at 35% .The Monetary Policy Committee will review the bank policy rate conditional on inflation developments and the performance of other monetary, financial and macroeconomic indicators,” he added
