Zambia Raises Key Lending Rate for Second Straight Month

Zambia’s central bank increased its benchmark interest rate for the second consecutive month as inflation continued to accelerate in June.

The policy rate was raised by 25 basis points to 9.75 percent, the Lusaka-based Bank of Zambia said in an e-mailed statement today.

“The move is not surprising given the recent uptrend observed in consumer price inflation and concerns about the inflationary consequences of recent kwacha weakness,” Razia Khan, head of African economic research at Standard Chartered Plc in London, said today by e-mail.

The bank is targeting inflation of 6 percent by the end of the year, even after the government removed fuel subsidies, Deputy Governor Bwalya Ng’Andu said on June 20. Pressure on inflation, which accelerated to a six-month high of 7.3 percent in June, may build, with the government planning to reduce corn subsidies this year and the energy regulator set to decide on an electricity tariff increase.

Zambia’s kwacha declined 0.2 percent to 5.4850 per dollar by 3:33 p.m. in Lusaka, extending its drop this year to 5.1 percent, according to data compiled by Bloomberg.

Growing price pressures threaten to prevent Zambia from meeting its inflation target, the central bank said.

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