BoZ lowers policy rate

Denny Kalyalya

The Bank of Zambia has lowered the policy rate by 150 basis points to 12.5% from 14.0%.

The central bank has also reduced the statutory reserve ratio by 300 basis points to 12.5% from 15.5%.

Speaking during a media briefing on the decision of the monetary policy committee, Bank of Zambia Governor Denny Kalyalya said arriving at the decision, the committee took into account the continued decline in inflation, with the inflation forecast to remain well below the 2017 target of 9.0% and within the medium-term target range of between 6 and 8 percent by early 2019.

Dr Kalyalya says the committee also noted the prevailing high lending rates, which continue to contrain access to credit by the productive sectors of the economy, as reflected in the sustained contraction of credit to the private sector; and subdued economic growth.

He states that the overnight interbank rate equally declined to 13.0% at the end of March 2017 from 15.8% at the end of December 2016, thus remaining within the policy rate corridor.

Dr Kalyalya adds that demand for government securities continued to increase in the first quarter of 2017, on account of easing liquidity conditions, mostly by local institutional investors.

He states that in the implementation of monetary policy, the central bank will continue to strengthen the forward looking monetary policy framework, anchored on the policy rate as the key signal for monetary policy.

Dr Kalyalya adds that changes in the policy rate will continue to be guided by inflation outcomes and forecasts as well as further progress in fiscal consolidation.