Zambia maintain end-year inflation target at 7.0%

By John Chola Zambia has maintained its end-year inflation target at 7.0 per cent. And the Monetary Policy Committee at its meeting held Friday 27, 2012 anticipates that Zambia’s international trade performance is expected to remain favourable in May 2012, mainly owing to an expected increase in merchandise export earnings. The Committee observed that global prospects are gradually strengthening though the economic recovery in industrialised economies remains fragile. In this regard, It says in addition, the continued favourable macroeconomic environment and positive sentiments regarding the economy are expected to have a positive influence on the supply of foreign exchange, and consequently have a moderating effect on inflation. The Bank of Zambia believes that although liquidity conditions in the money market are expected to ease in May 2012, threats to inflation will remain minimal. The Central Bank also says domestic credit growth is likely to remain within the projected path hence making the inflation target of 7 per cent a reality. The Central Bank is however concerned that the expected improvement in the supply of maize, fish and fresh vegetables on account of seasonal factors in the second quarter is expected to dampen food inflation. “These developments are expected to mitigate the lagged pass-through effects of the exchange rate depreciation experienced in the first quarter of 2012. In this regard, the Committee has weighed the inflation risks and has determined that inflation during the policy-relevant period would remain consistent with the end year target of 7.0 per cent.” And the Committee has decided to maintain the Bank of Zambia Policy Rate at 9.0 per cent for the month of May. The next meeting of the Monetary Policy Committee to review of the Policy Rate will be held at the end of May 2012. End...