By www.CentralBankNews.info Zambia’s central bank held its policy rate steady at 9.75 percent, saying the “monetary policy environment should remain tight during the policy-relevant period in order to be consistent with the end-year inflation objective.”
The Bank of Zambia, which raised its rate by 25 basis points last month, said there were still upside risks to its inflation objective from cost push pressures, largely from the pass-through effects of the depreciation of the kwacha currency, and it anticipates that further inflationary pressures may arise from demand pull factors in coming months.
“Notwithstanding the above, the Committee observed that inflationary pressures may moderate on account of lower food prices due to seasonal improvement in supply and the waning effects of the recent upward adjustment in fuel prices following the removal of subsidies,” it added in a statement from July 31.
Zambia’s inflation rate was steady at 7.3 percent in July and June and from late May to today the kwacha depreciated 4.4 percent against the U.S. dollar, quoted at 5.48 to the dollar today.
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The Bank of Zambia, which raised rates by 25 basis points in 2012, said in April that it expected inflationary pressures to continue to moderate in the month of April.
Inflation rose to 7.0 percent in April from 6.5 percent in March and the central bank said it was anticipating upward risks to inflation in June due to recent increases in the pump price of fuel coupled with the lagged effects of the recent exchange rate depreciation.
These pressures will be moderated by the relative stable prices of food due to a positive food balance as indicated in recent crop forecast surveys, the bank said.
Zambia’s average inflation rate in 2012 was 6.6 percent, according to the International Monetary Fund, which forecasts a decline to 6.5 percent this year.
