To Curb Inflation, Control Liquidity, CBL Raises Policy Rate To 17.25%

The Central Bank of Liberia (CBL) has announced an upward revision of its monetary policy rate to 17.25% for the second quarter of 2025. The decision, taken at a meeting of the Bank’s Monetary Policy Committee (MPC), is aimed at tightening excess liquidity and stabilizing prices amid growing inflationary pressure.

The new benchmark rate will be effective for the months of April, May, and June 2025.

According to a statement from the CBL, the move is part of ongoing efforts to manage the money supply in the economy and protect purchasing power.

The Bank emphasized that recent increases in the prices of essential commodities prompted the adjustment.

“The 17.25% interest rate will help maintain price stability while promoting sound credit conditions. It also allows commercial banks and other financial institutions to continue lending under more predictable terms,” the MPC noted.

In line with the new monetary stance, the CBL also adjusted parameters that govern how much liquidity commercial banks can hold or borrow from the Central Bank. These tools, the Bank says, are vital in managing cash flow and ensuring the financial sector remains robust.

The Central Bank acknowledged a surge in domestic liquidity, warning that too much money circulating in the economy could fuel further inflation.

To address this, the CBL is encouraging commercial banks to increase their reserves with the Central Bank, described metaphorically as joining the “CBL Susu Club,” which offers interest on deposits.

Officials explained that rising demand for U.S. dollars in the wake of post-holiday restocking activities has led to a depreciation of the Liberian dollar. Market vendors and importers are scrambling to replenish inventories following the 2024 festive season, creating upward pressure on the exchange rate.

However, the Central Bank advised the public not to panic or rush into currency exchange. Instead, it urged individuals and institutions to consider saving through formal banking channels that offer secure returns.

“CBL will continue to monitor inflation drivers and maintain a balanced approach to supporting economic activity while stabilizing prices,” the MPC added.

The Bank also expressed concern over the rising levels of non-performing loans in the banking sector. It warned that it will soon begin enforcing stronger measures to ensure that borrowers meet their repayment obligations.

“This is crucial to safeguarding the health of the financial sector,” the statement read.

Economists have reacted positively to the policy move, stating that raising the rate could cool down excess demand and help anchor inflation expectations.

However, they cautioned that higher borrowing costs could also slow private sector lending if not managed carefully.

The Central Bank reiterated its commitment to transparency and economic stability, assuring the public that it remains focused on strengthening macroeconomic fundamentals.

Liberia continues to face global and regional financial headwinds; the CBL’s policy recalibration represents a decisive step toward preserving monetary discipline and promoting sustainable growth.