The February 20th announcement on the Monetary Policy Committee’s decision for the first announcement of 2019 will be guided by inflation forecasts and outcomes as well as progress in the execution of fiscal consolidation measures according to the statement from the final MPC announcement issued by Dr. Denny Kalyalya on 21st November 2018 at the Central Bank in Lusaka.
The Central bank has over the last couple of quarters been closely monitoring inflation rates which have ranged towards the targeted upper bound of 6% to 8%. At its decision in November last year, the Central Bank acknowledged that should the heightened risks to inflation materialise, an upward adjustment in the Policy Rate may be necessary to prevent inflation from persistently staying above the target range.
The year on year Inflation rate for January 2019 remained at 7.9%, according to the Central Statistics Report published in February 2018. The chart herein shows that there has been containment which inevitably lead the Central Bank to cool off the easing of rates over the last 2 quarters of 2018.
During its decision making in November 2018, the central bank statement indicated that inflation was projected to exceed the upper bound of the 6-8% target range in the first three quarters of the forecast period, but was forecast to return with the target range and trend towards the mid-point of 7% thereafter. However, thus far, based on CSO’s January 2019 report, inflation remains within range.
With the MPC expected to consider economic data up to a particular close out date, Denny’s legion of Economists will be armed with inflation data that shows that up to the lock out period, inflation remained within the target range. Furthermore, they will have assessed the lower than expected and fragile economic growth that was fueled by negative business sentiments in 2018 knowing very well that the likes of Bloomberg have reported a rebound in Zambia’s Eurobond performance in January 2019 following their rout and condemnation to worst performing emerging market bonds in 2018.