Zimbabwe hikes interest rate to 70% to help plummeting currency - Zimbabwe Situation

Zimbabwe hikes interest rate to 70% to help plummeting currency

Source: Zimbabwe hikes interest rate to 70% to help plummeting currency | Fin24

Zimbabwe’s central bank raised its main interest rate to 70% to stabilize a plummeting currency and rein in surging inflation.

The decision is the first by the southern African nation’s Monetary Policy Committee, which was formed three days ago. The increase follows the government’s decision in June to ban the use of foreign currency and reintroduce the Zimbabwe dollar, abandoned in 2009, in an effort to manage consumer prices rising at the fastest pace in a decade.

The rate was increased from 50% “to take account of developments on inflation and the exchange rate,” central bank Governor John Mangudya said in a statement. “The bank expects inflation to start declining after the current high-inflation cycle ends, as attested by ebbing exchange-rate depreciation pressures, following the removal of the multi-currency system.”

The Zimbabwe dollar, a precursor of which was pegged to the dollar at parity as recently as February, is currently trading at almost 13 per dollar and annual inflation, which won’t be published until next February, is estimated at between 230% and 570%.

“The increase in the benchmark rate is an important step, but it’s still below the inflation rate, which is above 200%,” John Robertson, a Harare-based economist, said by phone. “I think by the end of the year, the inflation rate will still remain very high.”

COMMENTS

WORDPRESS: 3
  • comment-avatar
    ace mukadota 1 month ago

    They- interest rates- should be at least ten times higher comrades with inflation at 711 per cent as calculated by Professor Steve Hanke

  • comment-avatar
    GoRobin 1 month ago

    The exponential curve is the killer of all wallpaper money. Zimbabwe did the wallpaper money thing before and we all know how it ended. So why not try it again and perhaps a little bit of juju will make it different this time….not.

  • comment-avatar
    Truth 1 month ago

    Same horse different jockey, knackered, no hope, no idea and clueless. Raising interest rates will add to inflation not slow it, as bad money is chasing good money, hence goods will rise in price, exports what there is, will decline, leading to further devaluation.