On 22nd May 2019, Zambia’s Central Bank Governor Dr Denny Kalyalya announces the Q2 MPC Decision.
In order to appreciate the fundamentals of how the Dr. Denny and his MPC team have been shaping the course of monetary policy, here is a collection of the headline announcements following the MPC committee meetings since the epilogue announcement of 2016.
November 2016
Policy Rate Maintained at 15.5%, access to central bank liquidity by commercial banks eased.
February 2017
The Bank of Zambia (BoZ) Policy Rate reduced by 150 basis points to 14%, the Overnight Lending Facility (OLF) Rate reduced to 600 basis points above the Policy Rate, and the Statutory Reserve Ratio reduced by 250 basis points to 15.5%
May 2017
Bank of Zambia (BoZ) Policy Rate reduced to 12.5%, Statutory Reserve Ratio reduced to 12.5% and Policy Rate corridor narrowed to +/- 1 percentage point
August 2017
Bank of Zambia (BoZ) Policy Rate lowered to 11% and Statutory Reserve Ratio reduced to 9.5%
November 2017
Bank of Zambia (BoZ) Policy Rate Lowered to 10.25% and Statutory Reserve Ratio reduced to 8.0%
February 2018
Bank of Zambia (BoZ) Policy Rate lowered to 9.75% and Statutory Reserve Ratio reduced to 5.0%
May 2018
Bank of Zambia (BoZ) Policy Rate maintained at 9.75%
August 2018
Bank of Zambia (BoZ) Policy Rate held at 9.75%
November 2018
Bank of Zambia Policy Rate maintained at 9.75%
February 2019
Monetary Policy Committee holds the Policy Rate at 9.75%
Financial Insight Analysis
There are basic fundamentals that move an MPC decision. In Zambia’s case, what echoes from the Governors statement has been maintaining the rate of inflation in the fiscal target of 6% to 8%. Consistently, Central Statistics has reported that inflation rate has been maintained with this band.
In the next decision, prior of the embargo period when only certain economic fundamentals are considered, the country’s exchange rate will certainly be the elephant in the room. However, will it be enough to move the wise economics of the central? We will find out on Wednesday at 11 30 when the Governor makes his announcement.
The Chart below shows how the decisions have moved based on exchange rate and inflation.