The Monetary Policy Committee met today the 31st May 2012 to review recent economic developments and assess the upside and downside risks to the end-year inflation target of 7.0%.
The Committee observed that global economic growth continues to be weak, underpinned by the continued sovereign debt crisis affecting the Euro zone economies. Nonetheless, Zambia’s international trade performance is expected to remain favourable in June 2012, mainly due to an expected increase in merchandise export volumes. In addition, the continued favourable macroeconomic environment and the seasonal improvement in food supply will all have a moderating effect on inflation.
In the money market, liquidity conditions are not expected to pose a threat to inflation in the month of June 2012. Further, the improved supply of maize, fish and fresh vegetables on account of seasonal factors and the expected reduction in meat prices following the ban of maize and wheat bran exports will have a dampening effect on food inflation.
Overall, the above developments are expected to mitigate the lagged pass-through effects of the depreciation of the Kwacha experienced in recent months. Given the foregoing, the Committee has weighted the risks to inflation and has determined that inflation during the policy-relevant period would remain largely consistent with the end-year target of 7.0%. Accordingly, the Committee has decided to maintain the Bank of Zambia Policy Rate at 9.0% in June 2012.
The next meeting of the Monetary Policy Committee to review the Bank of Zambia Policy Rate will be held at the end of June 2012