Extract C

Central Bank tightens monetary policy to anchor inflation expectations

The Monetary Policy Committee has continued its cycle of raising the benchmark interest rate, aiming to tighten credit conditions and cool persistent inflationary pressures across the economy. By raising borrowing costs, the central bank intends to encourage savings and reduce the growth of consumer credit, which has surged recently due to increased credit card usage and overdraft borrowing during the holiday season. Commercial lenders have responded by raising interest rates on personal loans and tightening their lending criteria, which is expected to slow down mortgage approvals and big-ticket retail spending over the coming quarters.

While this policy is designed to restore long-term price stability, it introduces immediate challenges for heavily indebted households. Credit expansion, which grew by 8.5% year-on-year, is projected to decelerate sharply. Economists worry that this tightening could trigger a mild contraction in retail sectors, though monetary authorities maintain that safeguarding price stability is paramount to preventing a destructive wage-price spiral.

Of immediate concern to social analysts is the double squeeze of high inflation and rising borrowing costs. With wage growth failing to keep pace with price rises, a sharp contraction in real disposable incomes has left many households highly vulnerable to financial distress and unable to meet basic monthly commitments. Despite these mounting cost-of-living pressures, labor market indicators remain exceptionally tight, with the national unemployment rate hovering near historic lows.

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