BANK of Tanzania (BoT) will continue to implement prudent monetary policy focused on maintenance of price stability for sustenance of high economic growth.
The Bank said in its Monetary Policy Statement for June that it intends to adopt an interest rate based monetary policy framework in the 2018/19 financial year to safeguard effectiveness and credibility of monetary policy in achieving price stability and sustaining high economic growth. Previously BoT planned to switch interest rate based policy in May this year from reserve base policy.
“Under the framework, short-term interest rate will be the operational target, rather than quantity of reserve money, in monitoring and managing liquidity in the economy,” stated the report. Under the interest rate based monetary policy framework, when adopted, the monetary policy actions will seek to align the interbank cash market rate with the policy rate decided by the Monetary Policy Committee.
Similarly, with the continued coordination between monetary and fiscal policies, inflation is expected to remain close to medium target of 5.0 per cent. “While the continuation of the OPEC oilcut- deal may cause some inflationary pressures, the projected growth in domestic output, particularly food, is expected to dampen such pressures,” the report said.