- Benchmark interest rate increased by 100 basis points to 13.5%, highest since 2017
- Hike aligned with market expectations, marks sixth consecutive rate increase
- Actions taken to support local currency and fight inflation amid worst drought in decades
- Economic growth forecast lowered to 2.3% from prior estimate of 4.4% due to drought
Harare- The Central Bank of Zambia hiked its benchmark interest rate by 100 basis points to 13.5% during its regular meeting on the 15th of May 2024. This represents the highest interest rate since April 2017.
However, this aligned with market expectations.
This decision comes after a 150-basis point hike in February and marks the sixth consecutive instance where the central bank has raised its policy rate.
The central bank has taken these actions to support the local currency and mitigate inflation amidst the country's worst drought in decades.
The Kwacha is down 7% on a month-over-month basis, but has gained 37% year-over-year.
The Central Bank of Zambia expects continued movement of inflation away from the target band of 6-8% and the persistent rise in inflation expectations.
Zambia's inflation has been climbing since the middle of 2023, reaching a peak of 13.8% in April, its highest level in over two years, amidst a weakening currency.
Inflation is now forecast to average 13.7% this year, higher than the February estimate of 12.9%.
Meanwhile, growth forecasts for this year have been lowered to 2.3%, compared to the prior estimate of 4.4%, because of the effects of the drought.
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