THE Bank of Zambia has maintained the policy rate for the month of December at 9.25 percent. According to a press statement released yesterday by BoZ head of Public relations Kanguya Mayondi, the Monetary Policy Committee made a decision at its November 2012 meeting to maintain the Policy Rate at 9.25% for December 2012.
The Committee noted that inflation projections for end-December 2012 remain broadly in line with the target of 7.0 percent. A projection was also made that Inflationary pressures were expected to be moderated by relatively stable prices of some vegetables, reflecting an improvement in seasonal supply.
In addition, the price of maize grain and maize products is expected to remain stable as the Food Reserve Agency (FRA) supplies maize to the millers in December.
However, the Committee noted that there may be upward risks to inflation during December 2012 arising from the following the global grain deficit that may induce higher domestic and imported grain prices.
The lagged effects of the recent exchange rate depreciation as it may result in higher prices of imported goods and expected increases in prices of beef products mainly on account of demand arising from the festive season and fish prices as the fish ban comes into effect on 1st December 2012.
The Committee weighed these risks and was of the opinion that the moderating factors will outweigh the upside risks for inflation and therefore decided to maintain the policy rate at 9.25%.
The MPC should be targetting an inflation of below 4% since our economic growth rate is only at 6%.A policy rate of 9.25% is bad for the country as it means many zambians can afford bank loans especially with the high inflation.
What is a Policy rate? Why not talk of interest rates that we poor account holders understand?
The most attractive rate should be three time lower that what is currently obtaining to spur a higher economic rate. It is part of a deliberate monetary policy coupled with Quantitative Easing (QE) in the interest of encourage local innovation and entrepreneurship.
A higher rate such as the current one would only encourage more savings and treasury bill purchases. At this stage of the game, things should be more expansive than regressive. With a lower policy rate, a local entrepreneur can buy more equipment using credit facilities and participate well in projects like Link Zambia 8000 as a subcontractor.
The Zambian economy is now in the expansive mode and allow all cylinders to start firing at full capacity a lower rate is required which will lead to a higher rate of growth.
The most attractive rate should be three time lower than what is currently obtaining to spur a higher economic rate. It is part of a deliberate monetary policy coupled with Quantitative Easing (QE) in the interest of encourage local innovation and entrepreneurship.
A higher rate such as the current one would only encourage more savings and treasury bill purchases. At this stage of the game, things should be more expansive than regressive. With a lower policy rate, a local entrepreneur can buy more equipment using credit facilities and participate well in projects like Link Zambia 8000 as a subcontractor.
The Zambian economy is now in the expansive mode and to allow all cylinders to start firing at full capacity a lower rate is required which will lead to a higher rate of growth.
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