BOZ reduces monetary policy rate to 14.0 pc

Thu, 23 Feb 2017 11:19:17 +0000

By SHEILA SAKUPWANYA

THE Central Bank has reduced the monetary policy rate from 15.5 percent to 14.0 percent, representing a reduction of 150 basis points.

Speaking at the media briefing in Lusaka, Bank of Zambia (BoZ) governor Denny Kalyalya said the central bank decided to reduce the Policy Rate by 150 basis to 14.0 percent owing to the reduction in inflation rate.

“Inflation in January 2017 fell to 7 percent and current forecasts indicate that it will remain within the target range of 6 to 8 percent over the medium-term. Economic activity in the fourth quarter of 2016 continued to face challenges, with electricity generation, and the production of copper and some selected manufactured products declining,” Dr. Kalyalya said.

Dr. Kalyalya also said the BoZ reduced the Statutory Reserve Ratio by 250 points to 15.5 percent from 18 percent, and the Overnight Lending Facility Rate was also reduced to 600 from 1,000 basis points above the Policy Rate.

“Furthermore, the annual inflation rate closed the quarter of 2016 at 7.5 percent, down from the end of third quarter out turn of 18.9 percent attributing it to the sharp fall of inflation reflected mainly by the dissipation of the base effect, and continued appreciation of the Kwacha against the US Dollar,” he said.

He further said broad money grew modestly, but mentioned that the total domestic credit growth remained subdued and that the credit to the private sector contracted further due to tight credit conditions.

“The demand for government securities increased and yield rates declined as liquidity conditions eased further although lending interest rates remained high. The approved 2017 appropriately focuses on addressing the challenges to fiscal sustainability, economic diversification and growth,” he said.

He observed that effective implementation of the 2017 budget would present a good basis for rebalancing fiscal and monetary policies going forward.

“The Bank of Zambia will closely monitor domestic and external developments and stands ready to take appropriate monetary policy measures on price and financial system stability that support the diversification and growth of the economy,” Dr. Kalyalya said.