THE Bank of Tanzania (BoT) says the monetary policy stance used to regulate circulation of money in the economy remains to be an efficient way in curbing inflation.
This was said by the BoT economist, Mr Mwankemwa Lusajo, at the ongoing Dar es Salaam International Trade Fair (DITF) along Kilwa Road in the city.
Similarly, the monetary policy has been investors' friendly contrary to views that it has been discouraging the flow of investment.
"The high inflation rate has undesirable effects such as erosion of people's incomes, increasing cost of borrowing, cost of production and cost of living and it discourages domestic savings and impairs investment planning, thus hindering economic growth," he said.
He said the cost of living that touches directly the lives of the people is determined on the basis of relative changes in the average price of consumer goods in the economy.
Mr Lusajo added that there are many causes of inflation like rising wages, rising imports prices, low production, high production costs, food shortages but the main cause is a faster increase in money supply than goods and services.
For example, when the government spends more than revenue it collects and covers the difference by borrowing from the central bank, it implies printing money which may lead to the increase in inflation.
Thus, monetary stance applied by the BoT is always seeking to keep all economic fundamentals to ensure it favours investors' activities which play significant role in economic development.
On his part, Mr Charles Sama, also an economist at BoT said the bank controls inflation to keep it low and stable over time to promote sustainable growth of the economy.
Thus it is essential to keep low inflation rate because it is an important ingredient of a stable exchange rate and growth of strong export sector.