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BoZ hike policy rate to 13.5%

By Derrick Silimina

The Bank of Zambia has raised the Monetary Policy Rate (MPR) from 12.5 percent to 13.5 percent following persistent rise in inflation away from the target band of 6-8 percent.

Speaking during the Monetary Policy Committee(MPC) meeting held at the Central Bank on Wednesday, BOZ Governor Denny Kalyalya said if left unchecked, the high inflation is poised to undermine macroeconomic stability and efforts towards robust and sustained growth.

“This decision, therefore, augments earlier actions aimed at containing persistent inflationary pressures acting mostly through the exchange rate channel and addressing rising inflation expectations,” Dr. Kalyalya said.

The Central Bank Governor noted that in the first quarter of 2024, average inflation rose to 13.5 percent from 12.9 percent in the last quarter of 2023 adding that in April, annual inflation increased to 13.8 percent from 13.7 percent in March.

Dr. Kalyalya disclosed that the underlying factors including rising prices of food (maize grain, maize products and vegetables), fuel, geopolitical tensions and prolonged tight global financial conditions remain key upside risks to the inflation outlook.

“The committee noted that the current drought has led to a significant downgrade of the domestic growth forecast of 2024 to 2.3 percent from the earlier projection of 4.4 percent by the Ministry of Finance and National Planning, with agriculture and energy being the mostly adversely affected sectors.”

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