Fiscal and monetary policy are essentially macroeconomic instruments used to control or stimulate the economy. Because the two policies together have such a significant impact on a nation’s economy, firms, and consumers, they must be carefully controlled.
Based on this occurrence, the projection for inflation indicates that it is likely to reach its peak in the first quarter of 2023; and then level off at around 25% by the end of the year. The committee decided to raise the policy rate by 250 basis points to 27. 0% in order to continue to underpin inflation expectations, according to the bank.
The central bank noted that the typical lending rates of banks rose to 31.40 per cent in October 2022 from 20. 34 per cent in the same period of 2021. To curtail the inflationary pressures, the monetary policy managers have also increased the policy rate to 27. 5 percent in an attempt to mop up excess liquidity which they anticipate can help slow inflation.
However, it must be noted that the present economic condition is not business as usual, particularly at a time when the government is racing against time to secure a staff-level agreement with the IMF.