Bench Mark Lending Rate Market Note MPC Commentary

The bank of Zambia will have its first monetary policy meeting for the year 2018 and we attach a 90% probability that the benchmark rate will be relaxed further by 100-150bps to 9.25%. We feel the rise in bad loan provisions triggering a high loan loss ratio will be the sole driver of a rate cut. We however still bemoan the rise in average lending rates currently at 29.4% representing a widened spread of 925bps above current MPR. There could still be a 10% chance that the Bank of Zambia could leave rates unchanged to allow 2017 rate cut effects to exhibit the requisite results.