BOZ leaves pol­icy rate un­changed, prices -in in­fla­tion­ary pres­sure

Zambian Business Times - - FINANCIAL MARKETS -

The Cen­tral Bank in Africa’s sec­ond largest cop­per hotspot has held in­ter­est rates un­changed at 9.75%, this was an­nounced by Dr Denny Kalyalya in Lusaka on 16 May. The BOZ mon­e­tary pol­icy com­mit­tee com­menced de­lib­er­a­tions on Mon­day 12 May and the rate de­ci­sion was an­nounced to­day. This is the first time in 15 months the BOZ has held rates af­ter an ag­gres­sive ex­pan­sion­ary mon­e­tary pol­icy that saw the MPR cut by 575bps to 9.75%. The BOZ weighed the risks posed by the ris­ing non-per­form­ing loans in the in­dus­try against the need to grow the econ­omy to lev­els tar­geted how­ever be­ing alive to the risks to in­fla­tion in the medium term which could come from a rise in fuel prices given that crude is am­bi­tiously point­ing north to USD80/bbl. Zam­bia as a net im­porter then is vul­ner­a­ble to com­mod­ity shocks given that the Kwacha has de­pre­ci­ated to USD9.9/USD lev­els. Liq­uid­ity spreads above BPR have re­mained fairly wide which is still a source of con­cern for the reg­u­la­tor that still be­moans the high in­ter­est rates in the in­dus­try.

Zam­bia is pro­jected to grow at a pace of just un­der 5% with key driv­ers be­ing in­creased min­ing pro­duc­tiv­ity which is ex­pected to com­pen­sate the shrink in agri­cul­ture due to the lower than usual fore­cast in this year’s sea­son.

“We saw this com­ing and our pre-anal­y­sis was a tight call to grav­i­tate be­tween a mod­est rate cut and keep­ing the rate un­changed, it is an ex­pected out­come and are happy that the de­ci­sion shows the reg­u­la­tor had priced in in­fla­tion­ary pres­sures and above all autonomy in such a tight call,” Busi­ness Times Strate­gist said on the side­lines of the rate an­nounce­ment at Bank of Zam­bia of­fices in Lusaka.

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