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Zambia inflation at 3-year high, chance of more rate hikes

Sep 27 2019 14:01
Taonga Clifford Mitimingi

Zambia’s inflation rate rose to the highest in three years in September, increasing chances that the nation’s central bank will resume its tightening before the end of the year.

Consumer inflation accelerated to 10.5% from 9.3% in August, Mulenga Musepa, interim statistician general at Zambia’s statistics agency, told reporters Thursday in the capital, Lusaka. That’s the fastest rate of price growth since November 2016. Costs rose 1.2% in the month.

Key insights

Governor Denny Kalyalya warned last month that the central bank could raise interest rates again if inflation doesn’t return to the target band of 6% to 8%. The Monetary Policy Committee kept the key rate on hold in August after bucking the global trend in May by tightening by 50 basis points. The next policy announcement is scheduled for November 20.

Food costs are surging in the southern African nation amid the worst drought in almost four decades. The lack of rain has also caused a shortfall of electricity as it curbed output at the hydropower stations that the country depends on for 80% of generation. Zambia will import as much as 300 megawatts of power from South Africa from October, which could further fuel inflation. Petrol costs rose 5.1% on September 23, adding to upward pressure on consumer-price growth.

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