Zambia’s central bank increased its benchmark interest rate for the second consecutive month as inflation continued to accelerate in June.
The policy rate was raised by 25 basis points to 9.75 percent, the Lusaka-based Bank of Zambia said in an e-mailed statement today.
The bank is targeting inflation of 6 percent by the end of the year, even after the government removed fuel subsidies, Deputy Governor Bwalya Ng’Andu said on June 20. Pressure on inflation, which accelerated to a six-month high of 7.3 percent in June, may build, with the government planning to reduce corn subsidies this year and the energy regulator set to decide on an electricity tariff increase this month.
The Monetary Policy Committee “has weighed the inflation risks and determined that pressures during the policy-relevant period will remain a threat” to the target, it said in the statement.
Zambia’s kwacha declined 0.2 percent to 5,485 per dollar by 12:26 p.m. in Lusaka, extending its drop this year to 5.4 percent, according to data compiled by Bloomberg.
“We expect the Bank of Zambia to increase the base rate within two or three months’ time to curb the upward momentum in inflation,” Irmgard Erasmus, an economist at Paarl-based NKC Independent Economists, said in an e-mailed reply to questions yesterday.
Sourced at Businessweek.com
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