Sierra Leone cuts rate 50 bps to counter Ebola impact

    Sierra Leone’s central bank cut its monetary policy rate (MPR) by 50 basis points to 9.50 percent to promote private sector credit growth in an effort to stimulate economic activity against a backdrop of a challenging environment created by the twin shocks of Ebola and the collapse of international commodity prices, particularly iron ore.

    The Bank of Sierra Leone, which had kept the rate steady since December 2013, maintained its interest rate corridor, with repo transactions 50 basis points above the MPR and the standing facility rate 100 points above MPR. The new rates take effect March 23.

    The central bank said downside risks to inflation along with spare capacity in the economy justified an easier monetary policy and called on commercial banks to scale up their lending activity to the private sector.

     Sierra Leone's consumer price inflation rate eased slightly to 7.60 percent in January from December's 7.85 percent, mainly due to lower petroleum prices and the temporary lifting of the public health emergency ban on movements of goods and persons.

    Downside risks to inflation remain, the central bank said, noting that changes to consumer prices are driven by supply side factors that are considered to be temporary.

    The Ebola crises that has gripped Sierra Leone has the potential to lead to a significant contraction of economic output in 2015, with implications for government revenue and the country's balance of payments position.

    "These developments may warrant expansionary monetary policy intervention to stimulate aggregate demand and growth," the central bank said.

    Sierra Leone's Gross Domestic Product expanded by 7.0 percent in December 2014 compared with a projected 6.0 percent, but the central bank said there was still evidence of an increase in spare capacity.

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Sierra Leone cuts rate 300 bps, sees lower inflation

    Sierra Leone's central bank slashed its monetary policy rate (MPR) by 300 basis points to 12.0 percent, saying it expects food prices to continue to decline due to a good harvest and non-food prices to remain stable, helping contain inflationary pressures and push inflation further down.
    The Bank of Sierra Leone, which has now cut rates three times this year by a total of 800 basis points, also cut its other rates to align its rates with lower government treasury rates and money market rates. The reverse repo rate was cut to 12.5 percent and the standing facility rate to 13.0 percent.
    Sierra Leone's inflation rate eased to 10.58 percent in in June from 10.86 percent in May, continuing the declining trend since the start of 2012. Last year the central bank cut rates by 500 basis points.
    In a statement released on Aug. 30 following a meeting of the central bank's monetary policy committee on Aug. 29, the bank said economic prospects for this year remain favourable, "underpinned by encouraging trajectory of mining and non-mining sectors," including 10.5 millions metric tonnes of iron ore produced and exported in the first half of the year.
    For 2013, the central bank projects real growth of Gross Domestic Product at 13.3 percent, up from 6.2 percent in 2012, a forecast that is consistent with the second quarter outlook. Business confidence surveys show enhanced confidence and optimism resulting from stable macroeconomic conditions.