Zambia’s central bank on 22 May announced a 50 basis points to 10.25% signalling the first rate hike since December 2015.
Against all odds, Governor Denny Kalyalya limited the rate hike to 50 bps and left the stat reserves at 5% attributing his decision to the rising credit risks in light of the deteriorating fiscals stressing the need for realignment. Kalyalya kept track of the rising risks to inflation which his team forecasts will breach the 8% upper bound of the BOZ targeted range of 6-8%.
The Governor attributed the currency slide to speculative drivers on the back of waning sentiment and increased dollar demand for petroleum products. The Kwacha hit a 42 month low on Friday 17 May closing at 14.2 for a unit of the safe haven currency. Other drivers of the rate decision meeting announcement are the widening of weighted average yields on treasury bills to 22.60% (from 21.4% prev.) and 24.6% (from 20.1% prev.).
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