Zambia’s inflation rate fell for the first time in six months, easing to 7 percent in January and giving the central bank room to keep interest rates unchanged.
Inflation slowed from 7.3 percent in December after some food prices fell, John Kalumbi, director of the Central Statistics Office, told reporters today in the capital, Lusaka.
The government of Africa’s biggest copper producer has battled to contain inflation from higher food costs and a weaker currency. The central bank, which raised its benchmark interest rate by a quarter of a percentage point to 9.25 percent in October, is scheduled to make its next rate decision today.
“Inflation was lower than our expectations of 7.5 percent,” Yvette Babb, an emerging-market strategist at Johannesburg-based Standard Bank Ltd., said in e-mailed comments. “The decline in inflation is likely to reduce the chance of tightening of monetary policy.”
Food prices rose 7.6 percent in January from a year ago, while non-food costs increased 6.3 percent, Kalumbi said. The main contributor to slower inflation in January was corn meal, Zambia’s staple food, the price of which accelerated 1.6 percent in January compared with December, Zonde Lovemore, head of prices at the Central Statistics Office said in an interview in Lusaka.
Inflation will probably average 7 percent this year as the government “aggressively” targets that level, Nema Ramkhelawan-Bhana, an Africa strategist at FirstRand Ltd.’s Rand Merchant Bank unit, said in a phone interview from Johannesburg before the data was released.
The kwacha has slumped 3.4 percent against the dollar since the beginning of the year. It was trading down 0.3 percent at 5,400 a dollar by 1:07 p.m. in Lusaka. Yields on Zambia’s Eurobond maturing 2022 rose one basis point to 4.99 percent.
Millers agreed to lower the corn meal price after a Jan. 7 meeting with President Michael Sata. The effect of that is not yet fully reflected in the inflation numbers, which might show another “marginal” decline in February, Kalumbi said.