Zambia central bank holds key lending rate due to inflationary pressure


(Photo: VCG)

LUSAKA, Aug. 21 (Xinhua) -- Zambia's central bank on Wednesday kept its main interest rate at 10.25 percent for the second time this year.

Denny Kalyalya, the Bank of Zambia (BoZ) Governor, said the Monetary Policy Committee, which made the decision during its meeting on Aug 19 and 20, decided to maintain the policy due to projected inflationary pressure.

He told reporters during a press briefing that projected inflationary pressure will remain above the upper bound of the 6-8 percent target range for much of the forecast horizon, but revert to the target range towards the forecast period.

The central bank chief attributed the inflationary pressure to rising food prices and the impact of the depreciation of the local currency.

The central bank has since projected further weakening of near-term growth prospects, liquidity challenges and risks to financial stability.

According to the central bank, key upside risks to the inflation outlook include elevated external debt service payments, higher than programmed fiscal deficits and persistent drought conditions that may result in reduced domestic and regional agricultural production and lower electricity generation.