RBM warns of inflation surge, keeps policy rate at 26%

The Reserve Bank of Malawi (RBM) has warned that inflationary pressures remain high and could worsen in the coming months, prompting the Monetary Policy Committee (MPC) to maintain the Policy Rate at 26.0 percent

The decision was made at the fourth MPC meeting of 2025, held on 28th and 29th October, where members assessed domestic and global economic trends.

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In its statement, the MPC said inflation climbed slightly to 28.1 percent in the third quarter of 2025 from 28.0 percent in the previous quarter, reflecting continued price pressures in non-food items.

The annual inflation projection has been revised upward to 28.9 percent, compared to 28.5 percent forecast during the third MPC meeting earlier this year.

The central bank has attributed this rise mainly to upward fuel price adjustments, weak fiscal consolidation, and recurring supply-side challenges such as food shortages and production inefficiencies.

“The MPC observed that limited fiscal consolidation and recurring supply-side constraints continue to keep inflation elevated and undermine the pace of disinflation,” said Dr. MacDonald Mwale, Chairperson of the Monetary Policy Committee.

He said taming inflation will require intentional fiscal discipline and coordinated structural interventions to unlock productivity bottlenecks, stabilize prices, and reinforce macroeconomic stability.

Despite the inflationary environment, the RBM projects Malawi’s economy to grow by 2.8 percent in 2025, compared to 1.7 percent in 2024.

The expected recovery is anchored on a relatively better agricultural harvest, increased infrastructure spending, and investments in key productive sectors such as manufacturing, mining, and tourism.

The Committee noted that while growth prospects are improving, macroeconomic risks remain significant due to high inflation, fiscal pressures, and foreign exchange shortages.

The kwacha remained broadly stable during the review period, trading at MWK1,750.37 per US dollar on the official market and MWK1,937.41 at foreign exchange bureaus as of 30th September 2025.

However, the Committee noted that foreign exchange inflows remained subdued relative to demand, exerting additional pressure on prices and external reserves.

The RBM has emphasized that maintaining exchange rate stability will require enhanced export performance and sustained inflows from agriculture, mining, and development partners.

According to the October 2025 IMF World Economic Outlook, global growth is projected at 3.2 percent in 2025, slightly up from 3.0 percent in July.

Growth in advanced economies is expected to moderate to 1.6 percent, while emerging and developing economies are projected to expand by 4.0 percent.

The Committee also noted an increase in Brent crude oil prices to US$69.04 per barrel and urea fertilizer prices to US$488.28 per metric tonne in the third quarter of 2025, trends that are likely to keep import costs elevated.

To enhance transparency and stakeholder engagement, the RBM has announced a series of Monetary Policy Technical Forums to explain the MPC’s decisions and their implications for the economy.

The next MPC meeting is scheduled for 28–29 January 2026, with the policy decision expected to be announced on 29 January 2026.