Monetary policy rate increase predicted

THE Bank of Zambia (BoZ) could increase the monetary policy rate currently at eight percent in the next sitting owing to the persistent rise in inflation.

Inflation rate for this month accelerated for the fifth straight month to 25.6 percent due to soaring prices.

Widening inflation sending yields underwater is usually a sign of a soon coming curve correction if the central bank has to move in make assets attractive to investors.

This is according

Kwacha Arbitrageur zine.

The Magazine anticipated that the increase in the monetary policy rate would be to curb the interest rates which may go up.

“Barely a month to the first rate decision meeting of the year 2021, the signs in the sky point to a benchmark interest rate hikes given pressure on to the magainterest and exchange rate.

“Exchange rate risks have still persisted in the Zambian market space with widening backlogs causing strife in economic activity especially the Oil Marketing Companies that struggle with petroleum procurement causing shortages,” the Magazine said.

The Magazine recalled that the policy rate was exceptionally lowered to 8.0 percent the lowest ever since the Basis Policy Rate started being tracked in 2012.

It explained that the rate was cut because the BoZ needed to absorb Covid-19 induced credit risk by making credit obligation ease 350bps in total in a disease pandemic year.

“That explains why the regulator hard a difficult time sealing the lead on depreciation of the currency in extraordinary times. However all odds point to an eminent rate hike if the central bank is thinking price stability in this 2021,” the Magazine said.