By Derrick Silimina
The Bank of Zambia has increased the Monetary Policy Rate (MPR) to 14 percent following the high inflation continuing to remain above the 6-8 percent target band and its impact on the stability of the financial systems.
In a statement, BoZ Governor Denny Kalyalya disclosed that at its November 11-12, 2024 Meeting, the Monetary Policy Committee (MPC) decision to raise the Policy Rate is aimed at steering inflation back towards the target band and anchoring inflation expectations.
“In arriving at the decision, the Committee also took into account factors including complementary liquidity management measures, foreign exchange market reforms underway, the fragility of the economy in the wake of the severe impact of the recent drought; and the stability of the financial system,” Kalyalya said.
The Central Bank Governor further stressed that the key drivers of inflation were low supply of maize grain, fish and vegetables, increased demand for solid fuels due to sustained electricity load management, and depreciation of the Kwacha against major currencies
He noted that annual overall inflation continued to rise in the third quarter of 2024, averaging 15.5 percent from 14.6 percent in the second quarter of 2024 while in October, annual inflation rose to 15.7 percent from 15.6 percent in September.
“While inflation is projected to remain at an annual average rate of around 15.0 percent in 2024, the projection for 2025 is now higher at 13.9 percent than the 12.7 percent reported in August. The elevated inflation profile in 2025 is largely due to the recent depreciation of the exchange rate and increase in electricity tariffs, occasioned by the higher-than-expected impact of the drought on electricity generation.”
