Zambia Inflation Unchanged, Currency Gains Yet to Filter Through

Zambian inflation was unchanged in July as food price growth that has propelled the headline number over 20% this year remained steady.

Consumer prices rose 24.6% from a year earlier, the same as in June, Zambia’s interim statistician-general, Mulenga Musepa, told reporters in Lusaka, the capital. Costs increased 0.3% in the month, compared with 1.3% in June. Food price-growth was unchanged at 31.2% in July and non-food inflation slowed to 17% from 17.1% June.

A jump in the kwacha this month, making it the best performing currency among those tracked by Bloomberg in the period, may help to contain inflation pressures as importing goods becomes cheaper. The currency gained 18.2% against the dollar in July but was not reflected in the latest inflation reading as it happened after price data was collected by the statistics agency.

The appreciation was attributed to the nation’s improved foreign-exchange supply due to soaring copper prices, its main export, and expectations that it may soon finalize a deal with the International Monetary Fund for access to financing, the Bank of Zambia said in a statement Saturday.

If the slowdown in the monthly figure and the appreciation of the kwacha filters through into August’s reading it may ease pressure on the central bank to hike the benchmark interest rate when it meets toward the end of next month.

“It is important to note that monetary policy remains focused on containing escalating inflation back to the target range of 6-8% over the medium term,” the central bank said. “In this regard, managing risks to the inflation forecast, which include those associated with financial stability and the Covid-19 pandemic, remains critical. Price-growth has been above the upper bound for more than two years.”

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