The Bank of Zambia has announced that the monetary policy Committee decided to increase the monetary policy by 50 basis points rate from 13.5 to 14.0 percent.

Bank Of Zambia Governor Denny Kalyalya said the increase has been necessitated by the actual and projected inflation which has continued to remain above the 6 to 8 percent target band.

Dr. Kalyalya explained that the decision for the increase is also aimed at steering inflation back to the target band and anchoring inflation expectations.

And speaking at the same event Bank Of Zambia Deputy Governor Operations Francis Chipimo warned that the use of banknotes as flower bouquets is a serious offence which can attract a term of 10 years if convicted.

Dr. Chipimo explained that the procurement of money is done at a high cost and that bank notes should therefore not be degraded for any reason.

Komboni Radio Editorial Explains

The monetary policy rate is a mechanism by which the Central Bank determines the countries interest rate for new and existing loans across the board.

What does it mean?

If you have a loan with the bank that is linked to the rate, your monthly repayment will increase, or your loan period will be extended. By increasing the policy rate, the Bank of Zambia hopes that the increase in Interest rate would discourage excessive borrowing, slow down economic growth, and reduce inflation.

As noted in the news piece, the policy rate mainly targets the Inflation Rate.