By JAMES KUNDA –
THE Bank of Zambia (BoZ) projects that the pass-through effects from the depreciation of the Kwacha exchange rate will impact negatively on local inflation.
BoZ head of public relations Kanguya Mayondi said this was why the Monetary Policy Committee (MPC) of the Central Bank raised the Policy Rate by 175 basis points for April 2014.
Mr Mayondi said at its March 2014 meeting, the MPC decided to the raise the BoZ Policy Rate from 10.25 per cent to 12 per cent to tighten the monetary policy.
He said the MPC observed that inflationary pressures have continued to persist in 2014, with inflation rising from 7.3 per cent in January to 7.7 per cent in March.
“It is expected that the pass-through effects from the depreciation of the exchange rate will impact on inflation,” he said.
Mr Mayondi said, however, that the increase in the supply of selected food items during the forthcoming harvest period would moderate inflationary pressures.
“The Committee’s overall assessment is that risks to inflation are generally on the upside, and this is why it resolved to further tighten monetary policy by raising the BoZ Policy Rate.
The Committee expects this adjustment to buttress the measures implemented in the recent past and consequently contribute to moderating inflationary pressures,” he said.