The Bank of Tanzania (BoT) has adopted an interest rate-based monetary policy, effective January 2023, instead of the money supply.
This change aims to enhance the effectiveness of monetary policy in achieving low and stable inflation and supporting economic activities.
The BoT announced this change in a statement on Wednesday, January 3, signed by its governor, Emanuel Tutuba. Tutuba said the new framework aligns with Tanzania’s commitment to harmonize its monetary policy with other regional economic communities, especially the East African Community.
“A change in the CBR will signal the direction of monetary policy, indicating either a tightening or expansionary monetary policy stance,” he said.
— Bank of Tanzania (@BankOfTanzania) January 3, 2024
Depending on the inflation and growth outlook, the CBR will indicate whether the BoT wants to tighten or loosen its monetary policy. The CBR will also influence the interest rates that banks and other financial institutions charge.
However, the Bank of Tanzania cautioned the public not to confuse the CBR with the actual interest rates offered by banks and other financial institutions.
The BoT said it will not fix the interest rates, which will continue to be determined by market forces and other economic policies.
