Zambia Inflation Cools to 8-Year Low, Aided by Strong Kwacha

Zambia’s annual inflation rate fell to its lowest level since February 2018, remaining near the lower bound of the central bank’s 6% to 8% target range, as a strong currency helped keep the cost of imported goods in check.

Consumer prices rose 6.2% in August from a year ago, compared with 6.5% the month before, Chola Daka, the country’s acting statistician-general and director of demography and social statistics, told reporters in Lusaka, the capital, on Thursday. Prices rose 0.2% in the month.

While the kwacha has pared gains against the dollar this month because of concerns about instability following a disputed election, it remains Africa’s best-performing currency this year. President Hakainde Hichilema is due to be sworn-in for a second term on Sept. 1.

The southern African nation’s decision last month to extend a moratorium on fuel taxes until Sept. 30 as the simmering US-Iran conflict continued to feed through into higher energy and fertilizer costs also helped ease pricing pressures.

Zambia’s central bank lowered the benchmark interest rate to 13.25% from 13.5% in May, the third consecutive cut by its monetary policy committee. The decision was underpinned by a projection that inflation would cool further and bucked a global trend, with most policymakers globally adopting a wait-and-see approach to gauge the Iran war’s impact on their forecasts.

The next rates decision will be announced toward the end of next month.

Food inflation slowed to 6% in August, compared with 6.4% a month earlier, while non-food inflation ticked down to 6.6% from 6.7%.