Tanzania's monetary policy shift will alter consumer borrowing patterns
- How will transitioning to an interest rate-based monetary policy framework affect consumer borrowing costs and credit availability?
- How will interest rate and monetary policy changes impact consumer spending, inflation expectations, and household financial stability?
On January 3rd, 2024, the Bank of Tanzania (BoT) transitioned to an interest rate-based monetary policy, aligning with the rest of the East African Community. This shift, employing the Central Bank Rate (CBR) benchmark initially set at 5.5%, advances the Monetary Union's (MU) aspirations, especially currency convergence.
Previously, the bank employed reserve money to target the monetary policy framework and utilised various instruments to achieve its objectives, including repurchase agreements, open market operations, and statutory reserve requirements.
The BoT’s interest-based approach aims to contain inflation within the medium-term target of 5% while supporting economic growth to reach 5.5%. Inflation in the country fell to 3% in December from 3.2% in November due to a less accommodative monetary policy stance, sufficient domestic food supply, and lower imported inflation following the easing of global commodity prices, particularly oil. However, this was before the implementation of the benchmark rate by commercial banks.
We
Invest with Confidence, Operate with Precision.
Access economic and industry data & insight for global organisations.
Trusted by leading global organisations
