Zambia central bank hikes rates to 12.5%

Zambia’s central bank has raised its benchmark lending rate by 150 basis points to 12.5 per cent, for the fifth consecutive meeting due to a further deterioration in the inflation outlook, according to its Monetary Policy Committee statement on Wednesday.

In January, inflation in the southern African country rose to 13.2 per cent year-on-year, up from 13.1 per cent in December, which moved it further away from the bank’s target band of 6-8 per cent.

Bank of Zambia Governor, Denny Kalyalya, informed reporters that inflation is projected to average 12.5 per cent for the year, according to Reuters. He added that the purpose of raising the policy rate is to guide inflation back into the target band, according to the same news agency.

In its latest monetary policy statement, the central bank stated that the rise in inflation is primarily due to the persistent depreciation of the local currency and the impact of adverse weather conditions on food prices.

The kwacha has been experiencing repeated record lows against the U.S. dollar since November of last year, largely influenced by factors such as delays in debt restructuring and limited foreign-currency inflows, Reuters added.

(1 U.S. dollar = 26.78 Zambian kwacha)