The Bank of Zambia (BoZ) hiked the monetary policy rate from 12.5 percent to 15.5 percent.
Denny Kalyalya, the central bank governor told reporters at a press briefing that the increase has been necessitated by a sharp rise in the inflation rate last month as well as the depreciation of the local currency.
Zambia’s year-on-year inflation rose sharply to 14.3 percent in October compared to 7.7 percent recorded in September while the local currency, the kwacha has depreciated by 49 percent this year against major convertible currencies.
“We feel it’s really important that we have inflation anchored so that it doesn’t get unhinged,” the central bank chief said.
But analysts said the rise in the benchmark interest rate will increase the cost of borrowing from commercial banks.
Mambo Hamaundu, a financial analyst said small businesses will be mostly affected by the move. Enditem