Zambia's central bank holds rate as inflation is still well above target

By Chris Mfula

LUSAKA, Aug 13 (Reuters) - Zambia's central bank kept its main lending rate ZMCBIR=ECI at 14.5% on Wednesday, saying that although inflation was easing it remained well above target.

The Bank of Zambia aims to keep inflation within a 6%-8% range, but it has been above that band since 2019 as the Southern African copper-producing country has been mired in a debt crisis.

Annual inflation eased to 13% in July ZMCPIY=ECI, down from 14.1% in June.

Governor Denny Kalyalya told a press conference that inflation was now seen falling within the band in the first quarter of next year, whereas at the last monetary policy meeting in May that was only seen happening in the first quarter of 2027.

The central bank also maintained its monetary policy rate in May.

Kalyalya said keeping the rate at 14.5% would help consolidate the disinflation trend, which he said was driven by factors including improved maize supply, lower fuel prices and the appreciation of the local kwacha currency ZMW=.

Inflation could undershoot the bank's forecasts because of an expected increase in earnings from copper exports and subdued crude oil prices, he said, adding further progress on external debt restructuring could enhance macroeconomic conditions.

Zambia defaulted on its external debt in 2020 after years of unsustainable borrowing but battled its way to a restructuring deal with its primary creditors last year.

It is yet to agree terms with some smaller creditors.