Bank of Zambia Raises Policy Rate to Tackle Surging Inflation

Dr. Denny H. Kalyalya, the Governor of the Bank of Zambia, has raised concerns about inflation trends in the country. 

With inflation surging to 13.2% in January 2024, well above the target band of 6-8%, the situation poses significant economic challenges exacerbated by Kwacha depreciation and rising food and energy prices.

To address this issue, the Bank of Zambia has decided to raise the monetary policy rate by 150 basis points to 12.5%. 

This move aims to steer inflation towards the target band and anchor inflation expectations amidst ongoing exchange rate depreciation and adverse weather conditions affecting food prices.

Despite the inflationary pressures, the committee acknowledges continued fiscal consolidation efforts, progress in external debt restructuring, and prospects for increased investments in key sectors. 

Dr. Kalyalya emphasizes that the policy rate decisions will be guided by inflation forecasts and identified risks, including those associated with financial stability. 

The Bank stands ready to take appropriate action to maintain macroeconomic stability should inflation persist above the target band, he noted.