The Monetary Policy Committee has Maintained the BOZ Policy Rate At 9.0%

The Monetary Policy Committee met today the 27th April 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 prospects are gradually strengthening though the economic recovery in industrialised economies remains fragile. In this regard, Zambia’s international trade performance is expected to remain favourable in May 2012, mainly due to an expected increase in merchandise export earnings.

In addition, the continued favourable macroeconomic environment and positive sentiments regarding the economy are expected to have a positive influence on the supply of foreign exchange, and consequently have a moderating effect on inflation.

Although liquidity conditions in the money market are expected to ease in May 2012, threats to inflation will remain minimal as domestic credit growth is likely to remain within the projected path. Further, the expected improvement in the supply of maize, fish and fresh vegetables on account of seasonal factors in the second quarter is expected to dampen food inflation.

The above developments are expected to mitigate the lagged pass-through effects of the exchange rate depreciation experienced in the first quarter of 2012. In this regard, the Committee has weighed the inflation risks and has determined that inflation during the policy-relevant period would remain 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 May.

The next meeting of the Monetary Policy Committee to review of the Policy Rate will be held at the end of May 2012.