The thrust of monetary policy in 2020 is to deliver the medium-term inflation target of 8±2 percent while supporting the overall economic policy of Government. Inflation was relatively stable in June 2020 after it surged in April 2020, remaining outside the medium-term target band.
The surge in inflation was instigated by sudden hikes in food prices on account of COVID-19 containment measures implemented by Government.
Nonetheless, threats from inflation, though elevated, broadly remains under control and inflation is forecast to return to the medium-term target band by the second quarter of 2021, conditional on corrective fiscal measures introduced in the near term.
Developments in money supply in the second quarter of 2020 show that annual growth in broad money (M2+) moderated marginally, consistent with the slowdown in general economic activities, which in turn reflects the impact of COVID-19 pandemic on the real sector. Interest rates have generally trended downward in line with the cut in the monetary policy rate in March 2020.
