Zimbabwe to Hike Benchmark Rate to 200%, Central Bank Minted Gold Coins to Act as Store of Value – According to reports, Zimbabwe’s monetary authorities intend to increase the benchmark interest rate to 200 percent annually, one of the highest rates in the entire world.
This strategy is anticipated to aid in slowing down the nation’s out-of-control inflation, according to an official cited by Bloomberg. According to the most recent statistics from Zimbabwe’s statistical agency, the country’s inflation rate is at 191.6%.
Persistence Gwanyanya, a member of the Reserve Bank of Zimbabwe’s (RBZ) monetary policy committee, provided justification for the proposed action by stating that by raising the benchmark rate, the central bank will discourage speculative borrowing. Gwanyanya continued:
“They will encounter high rates at a time when banks were still adjusting their interest rates.”
Prior to this most recent announcement, the RBZ had on June 17 requested banks to stop lending at rates below 80% beginning on July 1, 2022.
In the same report, Gwanyanya is also described as conceding that the central bank’s original year-end inflation target of between 25 and 35 percent can no longer be met. The monetary policy committee has now increased its inflation rate prediction to a value that is above 100% due to the impact of what he called “external shocks.”
Gold coins will be introduced to the market as a tool that will allow investors to store money, according to a statement from the RBZ’s monetary policy committee (MPC). The announcement claims that the gold coins will be made by the country’s sole gold buyer and sold to the general public “via normal banking channels.”
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The MPC is determined to raise the medium-term accommodation interest rate from 50% to 100% in addition to suggesting the minting of gold coins. The minimum rate for local currency time deposits, on the other hand, “is expected to climb from 25% to 80% while the minimum rate for ZW$ savings is set to be raised from 12.5 percent to 40 percent.”
