Dec. 27 (Bloomberg) -- Zambia’s inflation rate rose to 7.3 percent in December, the highest in more than a year, prompting the likelihood that the central bank will keep its benchmark lending rate on hold for a second time tomorrow.
Inflation accelerated from 6.9 percent in November, Peter Mukaka, acting director of the Central Statistics Office, told reporters in the capital, Lusaka, today. Prices rose 0.8 percent in the month.
The Bank of Zambia boosted its key interest rate by 25 basis points to 9.25 percent in October to curb inflation in Africa’s biggest copper producer and held it in November. The kwacha, has weakened 2 percent against the dollar in the second half of 2012 and declined 4.5 percent to 5,134 by 2:56 p.m. in Lusaka, according to data compiled by Bloomberg.
The central bank has “probably played their cards already,” Charles Mate, managing director at Lusaka-based Stockbrokers Zambia Ltd., said by phone. He expects the rate to be held following a move last week to cap commercial lending costs at 18.25 percent in an effort to reduce borrowing expenses.
“If they were then to turn around and to push the bank policy rate a bit further that might not necessarily be consistent with the current stance of lowering interest rates,” Mate said.
Food costs rose 8.4 percent in December from 8 percent a month earlier, while the non-food rate increased 6.1 percent from 5.8 percent in November, the statistics office said.
The government has been selling corn at a discount to local millers in an attempt to curb rising prices for the staple food. Corn-meal prices that climbed as much as 50 percent over the last two months in parts of the country are “unacceptable,” President Michael Sata said on Dec. 21. Corn-meal costs rose 14.8 percent in December from the previous month, according to the statistics office.
Moves to reduce prices are starting to take effect and should help ease inflation, Mate said, without giving a forecast. Inflation may slow to 7.2 percent by the end of 2012, Governor Michael Gondwe said in a Dec. 13 interview. In 2013, inflation is expected to average 6 percent, according to the International Monetary Fund.
The country’s trade surplus fell to 112.8 billion kwacha ($22 million) in November from 291.2 billion kwacha for October, according to the Central Statistics Office.
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