Experts Question Effectiveness of Monetary Policy Rate Adjustments

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Economic Development Advocate Henry Muleya has criticized the Bank of Zambia's recent decision to increase the Monetary Policy Rate (MPR) by 50 basis points to 14%, citing concerns that it may not effectively manage inflation.

Mr. Muleya has argued that empirical evidence from the Bank of Zambia's own data shows that MPR adjustments have not led to reduced inflation.


He has pointed out that the two previous MPR adjustments made by the Bank of Zambia in 2024 resulted in higher inflation increments than when the rate was maintained.


Mr. Muleya has explained that when the MPR was adjusted by 150 and 100 basis points in quarters one and two, inflation rates rose by 1% and 0.8%, respectively, compared to a 0.2% increase in the third quarter when no adjustment was made.


He has emphasized that Zambia's economy, characterized by a large informal sector with limited access to formal financial services, cannot be effectively managed using traditional economic models.

Mr. Muleya has contended that the Bank of Zambia's assumption that inflation is driven by excessive money circulation is flawed, and instead, attributes the current inflation to low productivity and slow economic growth.


Meanwhile Mr. Muleya has urged the Bank of Zambia to develop a tailored model for managing inflation, taking into account Zambia's distinct economic structure.

He has questioned the wisdom of implementing policies that may further slow down economic growth.

As Zambia grapples with inflation, currently at 15.7% as of October 2024 ², experts like Mr. Muleya has highlight the need for innovative solutions that address the country's unique economic challenges.

Ends......................

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