Friday, February 28, 2014

Zambia raises rate 50 bps on upside risks to inflation

    Zambia's central bank raised its policy rate by 50 basis points to 10.25 percent, saying the monetary policy committee's "overall assessment is that risks to inflation are generally on the upside."
    The Bank of Zambia, which raised rates by 50 basis points in 2013, said the further tightening of its policy should help put inflation on the path toward its 2014 inflation target of 6.5 percent.
   "The upward adjustment in the policy rate, including the recent increase in the statutory reserve ratio to 14.0% from 8.0%, will help address the high liquidity levels in the market and contribute to exchange rate stability," the central bank said.
    Zambia's inflation rate rose to 7.6 percent in February from 7.3 percent in January but the central bank said it expects inflationary pressures to moderate to due improvements in the supply of selected food as the harvest season gets underway and the fish ban is lifted.
    Last month the central bank held an emergency meeting with lenders to examine the decline in the Zambian kwacha against the dollar. Like many other currencies, the kwacha came under pressure last year and the pressure has continued this year.
    The kwacha was trading at 5.83 to the U.S. dollar today, down 5.5 percent this year.


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