Bank of Tanzania: a lower policy rate won’t automatically mean cheaper loans
A Bank of Tanzania official said on Wednesday that cutting the Central Bank Rate does not guarantee cheaper loans, because commercial banks set their own rates. He said private sector credit growth hit 33.4% in September.
A cut in the Bank of Tanzania's (BoT) policy rate does not mean loans will get cheaper straight away, a senior official said. Commercial banks have the final say on what they charge borrowers, Mwananchi reported. John Mero, Assistant Manager in the BoT's Monetary Policy Department, spoke to journalists on Wednesday at a training session in Dar es Salaam. Mero said the Central Bank Rate (CBR) guides interest rates across the financial system but does not cap what banks charge. He said changes to the CBR affect the cost of money in the banking system. They also signal to lenders that they should adjust rates on loans and deposits. Each bank sets its rates based on its own costs, risks and competition, he said. "Borrowers may not benefit immediately from a cut in the policy rate," Mero said. He added that the size of any cut in lending rates will vary from one lender to another. He said this matters most for small and medium businesses that rely on bank loans to grow and fund daily…
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