Anti-Bakili Muluzi / MALAWI POLITICS TODAY

Malawi cuts bank rate to 15 pct as inflation eases

Thu 1 Nov 2007, 13:37 GMT

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By Mabvuto Banda

LILONGWE (Reuters) - Malawi's central bank cut its bank rate to 15 percent from 17.5 percent on Thursday in response to sliding inflation.

"The monetary policy committee observed with satisfaction that all macroeconomic indicators continue to perform well, and the reduction in the bank rate was necessary to sustain growth," central bank spokeswoman Miriam Wemba said.

The cut follows a reduction from 20 percent in August, and comes in the wake of good maize harvests over the past two years that have helped drive down food inflation.

Headline inflation in the southern African nation eased to single digits for the first time in four years in January and has continued to slow, reaching 7.1 percent year-on-year in September.

Malawi's economy is growing rapidly, buoyed by the agricultural sector.

The International Monetary Fund last month upped its forecast for growth in 2007 to 7.5 percent from 5.6 percent.

Finance Minister Goodall Gondwe said he expected more rate cuts with inflation set to continue easing.

"With the latest inflation for September now at 7.1 percent, revised strong growth of 7.5 percent for this year, I mean the bank rates had to be reduced," he told Reuters.

"We expect further cuts if we continue at this pace."

Analysts welcomed the move.

"It's a timely move and I think it will greatly help in accelerating the pace of lending by the financial system," said Andy Kuigomba, Head of Treasury at Nedbank, one of the leading banks in the country.