The discount rate is the interest rate at which the Central Bank lends money to commercial banks in the country. A change in the discount rate is expected to be transmitted to other market interest rates like lending rates and deposit rates.
The level of the discount rate is decided upon by the Governor in consultation with the Monetary Policy Consultative Committee (MPCC) which meets every two months. The decision is taken after considering international, regional and domestic economic developments.
In the last MPCC meeting held on January 27, the Bank increased the discount rate to 6.75 per cent from 6.5 per cent. The next MPCC meeting will be held on 31 March 2023.
Visit https://lnkd.in/dUPfas2s to read the latest monetary policy statement.
| MONETARY POLICY STATEMENT | JANUARY 2023 |
27 January 2023
The CBE increased its interest rate to 6.75 per cent from 6.5 per cent.
Headline inflation decreased to 5.6 per cent in December 2022 from 5.8 per cent in the previous month.
What does this mean?
Banks are expected to increase the prime lending rate on loans extended to individuals and businesses to 10.25 per cent until the next monetary policy meeting.
What to expect
The CBE expects the cost of goods and services to increase moderately in 2023. The CBE maintained its inflation forecasts for 2023 at 5.5 per cent.
Economic activity, as measured by the Quarterly Gross Domestic Product grew by 1.1 per cent on a year-on-year basis in the third quarter of 2022, from a revised decline of 0.1 per cent in the second quarter of 2022.
Visit https://lnkd.in/dUPfas2s to download the full statement.