Zambia central bank maintains benchmark interest rate at 15 percent

Zambia will keep its key benchmark interest rate unchanged at 15.5 percent, the country's central bank said Tuesday in its quarterly announcement.

The central bank's monetary policy committee also said it expected inflation to remain steady in the coming months and may hit a single digit by the fourth quarter of this year.

Bank of Zambia (BoZ) Governor Denny Kalyalya told reporters that the committee decided to maintain the benchmark lending rate at 15.5 percent as a measure to contain inflation.

According to the central bank chief, the need to maintain the policy rate was also due to consideration that the measures put in place in the last quarter were bearing fruits.

The measures have seen inflation declining while the exchange rate has remained stable, he added.

"The slowdown in the inflation rate reflects mainly the relative stability in the exchange rate which partially offset the effect of high production costs induced by power rationing, decline in the supply of some food items and the hike in taxes and customs duty on some non-food items," he said.

According to him, the central bank has forecasts annual inflation rate to decelerate in the remaining quarters, with a sharp decline in the fourth quarter.

While acknowledging that economic activity remains constrained, the central bank said the government fiscal outrun showed some improvement, resulting in the narrowing of the current account deficit.