Zambia holds rate, higher FX to moderate inflation

    Zambia's central bank held its policy rate steady at 9.75 percent after two recent rate rises, saying the recent appreciation of the kwacha currency following a better supply of foreign exchange "will moderate inflationary pressures going forward."
    The Bank of Zambia, which raised rates by a total of 50 basis points in June and July, said inflationary pressures are expected from higher liquidity levels in the banking system in connection with the recently-implemented public sector wages.
    In addition, higher prices of some food items, particularly maize grain and maize products, due to a regional maize deficit, may lead to higher inflationary pressures.
    Zambia's inflation rate eased slightly to 7.0 percent in September from 7.1 percent in August but is still above the central bank's 6.0 percent target for the end of the year.
    Like many other emerging market currencies, Zambia's kwacha fell in late May through through early July, but since then it has appreciated. From late May through early July, the kwacha fell over 5 percent, hitting a year-low of 5.54 to the U.S. dollar on July 10. Since then it has bounced back, trading at 5.31 to the U.S. dollar today, down only 2 percent from the start of the year.

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