- Inflation to remain in 6% to 8% range over next eight quarters
- Rate of consumer-price growth is near lowest since 2013
LUSAKA – Zambia’s central bank cut its benchmark lending rate by 150 basis points to 11 percent on Thursday, citing lower consumer inflation and weak growth.
“Inflation has been declining and we see that it will remain within the medium term target range of 6-8 percent. We also noted that economic growth has been sluggish,” said Bank of Zambia governor Denny Kalyalya.
The southern African nation’s consumer inflation rate is near the lowest since 2013, with this year’s record harvest of corn, which is used to make a local porridge, leading to lower food prices. A reduction in fuel costs this month could also ease inflationary pressure in the continent’s second-biggest copper producer, which has been struggling with ballooning budget deficits as metal prices fell and state spending rose.
Inflation will remain in the medium-term target range of 6 percent to 8 percent over the next two years, Kalyalya said.
The International Monetary Fund is still engaging with Zambia over a potential program, it said earlier this week. The nation was on course to reach a staff-level deal with the IMF for about $1.3 billion last month, Finance Minister Felix Mutati said at the time.
The inflation rate fell to 6.6 percent in July and has been below the government’s 9 percent target for the year since November. It peaked at 22.9 percent in February last year.
Higher agricultural output, a recovery in power generation and more mining production have improved growth prospects, with the bank raising its forecast for expansion in gross domestic product this year to 4.3 percent from 3.9 percent. It increased the estimate for next year to 5.1 percent from 4.6 percent. (Reuters)