The Bank of Zambia (BOZ) has insisted that there is still a scope for getting the Monitory policy rate to drive inflation rate in Zambia’s current economic set up as the global central banking community has been debating the degradation of the link between interest and inflation.
BoZ Governor Dr. Denny Kalyalya says the bank is still finding a strong transmission mechanism between the Exchange rates, interest rates, Inflation and Business / Consumer Expectations. However the Governor did state that he interest rate mechanism of inflation targeting is that has been more successful around the world but has faced noise and interference from other forces such as agricultural yields (food inflation), low financial inclusion and the looming fiscal deficit.
Dr. Kalyalya says expectation plays on both the interest and exchange rates as it moderates or amplifies the risk perception adding that there is need to dry out other channels in order for the mechanism to work.
He was responding to a question by Money FM Zambia during a press briefing announcing the monetary policy rate in Lusaka
The Bank of Zambia has adopted inflation targeting as a measure to drive the growth of the country on premise that countries that have adopted this method are faring very well even through financial crises.

Though the bank of Zambia did decide to Hold the policy rate at 10.25%, in theface of rate hiking pressure and growing economic uncertainty, the central bank did state that should the economy stabilise they have not taken, the currently Globally popular, Quantitative easing path of the table for economic stimulation as they had done for five consecutive quarters ending in the second quarter of 2018 targeting to keep inflation between 6 and 8 percent.
The country has however seen a gradual increase in the rate of inflation reaching up to 8.8 percent in July with fears of increasing inflationary pressures as the year drives towards the end.