Changes in monetary and financial conditions Overall, monetary conditions are a reflection of our expansionary policy, especially with respect to interest rates and the monetary aggregates. BIS Review 167/2009  1  The Libor is currently at the level targeted since March this year, i.e. 25 basis points, a level which can be regarded as a floor. The fact that it was impossible to bring the rate down any lower than this led us, in March, to introduce other instruments in order to make our monetary policy as expansionary as the circumstances demanded. Monetary conditions have become more expansionary via the interest rate channel in particular. Indeed, credit premia on the capital markets have declined steadily since the beginning of the year. As yields on Confederation bonds have remained low, other long-term yields have also trended downwards. It has thus become cheaper for companies to raise funds by borrowing on the capital market. In addition, our figures show that financing in the form of bank loans has also become more attractive following the decline in the Libor. In real terms – i.e. after factoring in expected inflation – interest rates are even lower. The Swiss franc has appreciated slightly in trade-weighted terms, as a result of the recent weakening of the dollar. However, it has remained stable against the euro, which shows that the monetary policy followed since March has been effective.
With the anticipated bumper harvest of maize coming on the market as the marketing season opens this month, maize prices are expected to fall and assist in keeping food inflation in check and overall inflation at a single digit level. The challenge will be to anchor inflation at these single digit levels throughout this year and beyond. In order to do this, continued implementation of appropriate monetary and fiscal policies as well as maintaining relative stability of the exchange rate would be vital plus increased production of goods and services. Ladies and Gentlemen, recently, the exchange rate market has been characterized by a general appreciation of the Kwacha against major foreign currencies. This has been mainly due to increased supply of foreign exchange on the market relative to demand. The key factors underlying the increased foreign exchange supply include:  BIS Review 72/2006  1  ii. increased copper output and exports as well as record high prices. Copper exports volume has in recent year registered sustained growth, increasing from 353,000 metric tons in 2003 to 423,000 metric tons in 2005. The price of copper rose to US $ per tonne in December 2005 from US $ per tonne in December 2004. By May 19, 2006, the price of copper had increased to US $ per tonne,  iii. increased non-traditional export earnings, from US $ million in 2003 to US $ million in 2005,  iv.