Zambia raises rates as inflation moves further above target

By Chris Mfula

LUSAKA (Reuters) -Zambia’s central bank on Wednesday increased its benchmark lending rate by 50 basis points to 10.0%, noting that inflation had moved further above its target and was expected to stay high.

It was the third time this year that the bank has raised its key rate to try to tame inflation, which rose to 10.3% year-on-year in July from 9.8% in June.

Inflation is expected to average 10.2% in 2023 and 9.3% in 2024 and the first half of 2025, well above the target range of 6% to 8%, the central bank said on Wednesday.

“Left unchecked, this would undermine the gains already made in restoring macroeconomic stability,” Bank of Zambia Governor Denny Kalyalya told a news conference.

The southern African nation was the first country in Africa to default on its sovereign debt during the COVID-19 era and finally clinched a restructuring deal with its official creditors in June this year.

Decisions on the policy rate will continue to be guided by inflation outcomes, forecasts and risks, including those associated with external debt restructuring, Kalyalya said.

The next Monetary Policy Committee meeting will be in November.

(Reporting by Chris Mfufa; Writing by Nellie Peyton;Editing by Alexander Winning and Christina Fincher)