After reviewing recent macroeconomic and financial developments in both the global and domestic environments, Sierra Leone's Central Bank has announced an increase in its benchmark lending rate to 18.75 percent.
After the Monetary Policy Committee (MPC) meeting on March 30th, 2023, the Acting Governor, Ibrahim L. Stevens, announced that the Monetary Policy Rate (MPR) had been raised by 0.50 basis points (bps). As a result, the Standard Lending Facility Rate (SLFR) and the Standard Deposit Facility Rate (SDFR) would also be adjusted upwards by the same margin, effective from Monday, April 3rd, 2023.
The Central Bank's reverse repurchase transactions with commercial banks on an overnight basis under the Standing Facility have an interest rate applicable, which serves as the ceiling rate for the injection of overnight liquidity to the banking system in Sierra Leone. However, the maximum rate for the injection of overnight liquidity into the banking system by the Central Bank is the SLFR. This move by the monetary authority was made amid significant inflationary pressures that have been affecting Sierra Leoneans, with the MPR being a critical interest rate in the evolution of the economy's main monetary variables.
The MPC noted that inflation has been persistently reducing household real incomes, posing a threat to macroeconomic stability and reducing the welfare of households. Therefore, the Committee had to adjust the rates upwards, considering the continued upward risks to prices and the depreciation of the exchange rate. According to Statistics Sierra Leone, in February 2023, the inflation rate had increased by 5.06 percent compared to the December 2022 headline inflation rate of 37.1 cents.