Reported by: S. Ernest.
Date: 12th February, 2025.
Lusaka, Zambia
In a strategic move to combat rising inflation, the Bank of Zambia’s Monetary Policy Committee (MPC) has raised the Monetary Policy Rate by 50 basis points to 14.5 percent.
Announced after the MPC meeting held on February 10-11, 2025, this decision is aimed at stabilizing inflation within the 6-8 percent target range and reinforcing confidence in the country’s economic outlook.
Zambia has faced persistent inflationary pressures, with the average inflation rate increasing to 16.3 percent in the fourth quarter of 2024, up from 15.5 percent in the previous quarter.
A major contributor to this rise was the implementation of emergency electricity tariffs in November 2024, a measure necessitated by drought conditions that impacted power generation.
The resulting surge in non-food inflation—from 12.2 percent in October to 14.1 percent—has further compounded the inflationary environment.
Additionally, reduced supply of key food items such as vegetables and fish, alongside continued depreciation of the exchange rate, has sustained upward pressure on consumer prices.
Projections indicate that inflation will remain above the target range for the next eight quarters.
The 2025 inflation forecast has been revised to 14.6 percent, up from the 13.9 percent projected in the November 2024 MPC statement, reflecting the sustained effects of price increases and currency depreciation.
Inflation expectations among businesses and consumers also remain elevated, reinforcing the need for a proactive monetary policy stance.
Despite these challenges, the risk assessment suggests a potential shift toward improved price stability.
Factors such as an expected rebound in maize grain production and increased electricity generation—supported by favorable rainfall—are likely to ease inflationary pressures.
However, external risks, including global trade disruptions and geopolitical uncertainties, continue to pose threats to price stability.
Reaffirming its dedication to macroeconomic stability, the MPC emphasized that taming inflation remains a top priority.
The 50-basis-point rate hike is designed to anchor inflation expectations and guide the economy toward sustainable growth.
The Bank of Zambia remains prepared to take additional measures should inflation continue to exceed the target range.
Future policy decisions will be guided by inflationary trends, macroeconomic forecasts and financial stability considerations.
A comprehensive analysis of economic developments and inflation projections will be available in the February 2025 Monetary Policy Report, set for publication on the Bank of Zambia’s website (www.boz.zm) by the end of the month. The next MPC meeting is scheduled for May 19-20, 2025.
Picture Credit: BOZ
Bank of Zambia
The Agency