BOZ RAISES THE MONETARY POLICY RATE BY 50 BASIS POINTS TO 14.0%
HIGHLIGHTS from the press briefing held by the Bank of Zambia Governor Dr. Denny Kalyalya
✅ The Bank of Zambia has raised the Monetary Policy Rate (MPR) by 50 basis points to 14.0 per cent which has been necessitated by actual and projected inflation continuing to remain above the 6-8 per cent target band.
✅ The Monetary Policy Committee (MPC) made the decision to increase the policy rate which is also aimed at steering inflation back towards the target band and anchoring inflation expectations.
✅ The Committee also considered the following:
i) Complementary liquidity management measures under consideration
ii) Foreign exchange market reforms underway
iii) The fragility of the economy in the wake of the severe impact of the recent drought; and
iv) The stability of the financial system
✅ The Bank of Zambia Governor said in 2024, annual overall inflation continued to rise in the third quarter, averaging 15.5 per cent from 14.6 per cent in second quarter. In October, annual inflation rose to 15.7 per cent from 15.6 per cent in September.
✅Dr. Kalyalya said 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 said while inflation is projected to remain at an annual average rate of around 15.0 per cent in 2024, the projection for 2025 is now higher at 13.9 per cent than the 12.7 per cent percent reported in August.
✅ Dr. Kalyalya said 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.
✅ He said in the in the first quarter – third quarter of 2026, inflation is expected to decline to 9.0 per cent, which will still be outside the 6-8 per cent target band. The risks to the inflation outlook are still heavily weighed to the upside and include higher maize grain prices and persistent exchange rate depreciation.
✅ In the third quarter of 2024, the depreciation of the Kwacha against the US dollar moderated further to 1.7 per cent from 3.8 per cent in second quarter.
✅ BOZ Governor further attributed the above stated to the reduction in demand backlog due to continued improved supply of foreign exchange and a relatively weaker US dollar induced by heightened expectations of the interest rate cut by the US Federal Reserve.
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