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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