Financial analyst says the decision by the Bank of Zambia to increase the monetary policy rate by 125 basis points to 11.5 percent from the previous 10.25 percent is not a good move because it will push the interest rate to one of the highest places it has been in a long time.
Money FM in-house financial analyst Munyumba Mutwale says the move taken by the Central Bank will result in increased cost of doing business in the country.
“Unfortunately this is not the probably the best move, in trying to curb spending and inflation the Bank of Zambia may increase the cost of doing business” He said.
Mr Munyumba said most of the businesses are at their weakest points and may not contain the cost of service that will come with the increase in interest rates.
He said businesses pegged to the monetary policy rate will have to hike the cost of their services in a bid to service their business costs.
“Business that might have rates pegged to the monetary Policy Rate now have higher interest rates cost, and in order to service the costs they will be forced to hike their service coast” He added.
Mr Munyumba notes that the move this may trigger inflation in the system while slowing down economic activities.
The Bank of Zambia yesterday increased the Monetary Policy Rate by 125 basis points to 11.5 percent from the previous 10.25.
Bank of Zambia Governor Dr. Denny Kalyalya said the decision was arrived at as a result of the tough economic conditions in an effort to keep the inflation rate under control.