The Bank of Zambia (BoZ) has announced the increase in the Monetary Policy Rate (MPR) by 50 basis points to 14.0 percent, aimed at steering the inflation back towards the 6-8 percent target band.

During a Monetary Policy Committee (MPC) Media briefing today, Bank of Zambia Governor, Denny Kalyalya said following an MPC meeting held on November 11 and 12, 2024, the Committee decided to increase the MPR by 50 basis points to 14.0 percent from 13.5%.

Dr Kalyalya said the increase has been necessitated by actual and projected inflation to continue remaining above 6-8 percent target band.

He disclosed that, in arriving at the decision, the Committee also took into account complementary liquidity management measures, foreign exchange market reforms, the fragility of the economy in the wake of the severe impact of the recent drought and the stability of the financial system.

He narrated that, while inflation is projected to remain at an annual average rate of around 15.0 percent in 2024, the projection for 2025 is higher at 13.9 percent 12.7 percent as reported in the August 2024 MPC statement.

Dr Kalyalya also explained that the elevated inflation profile for 2025 is largely due to the recent depreciation of the exchange rate and the increase in electricity tariffs, occasioned by the higher-than-expected impact of the drought in electricity generation.

He further said the drought has also resulted in real Gross Domestic Product (GDP) growth projection for 2024 being significantly revised downwards to 1.2 percent from the 2.3 percent in July.

He said in the first three quarters of 2026, inflation is expected to decline to 9.0 percent, which will still be outside the 6-8 percent target band.

Dr Kalyalya further reaffirmed that the bank stands ready to take appropriate action, should inflation persist above the 6-8 percent target band and that decisions on the Policy Rate will continue to be guided by inflation outcomes and forecasts and identified risks.