Zambia’s annual consumer price inflation rate remained flat in May as compared to April at 7.8%, as a higher growth in food prices growth offset a decline in non-food inflation, data from the country’s Central Statistical Office (CSO) showed as quoted by Zambia Daily Mail.

The annual food inflation accelerated to 8.0% this month from 7.6% in April, while non-food inflation eased to 7.6% from 7.9%. Food inflation contributed 4.1pps to the overall inflation, up from 3.9pps in April, and non-food inflation contributed 3.7pps, down from 3.9pps in April.

Zambia’s monthly inflation rate rose to 0.9% in May from 0.7% in April.

At its latest meeting held earlier this month, the Monetary Policy Committee of Zambia's central bank left the policy rate unchanged at 12% after raising it by a total of 225bps at its previous two meetings in March and April, saying that inflationary pressures have subsided. The Bank of Zambia had to tighten its monetary policy, as the annual inflation rate rose from 7.1% at end-2013 to 7.7% in March 2014 mainly due to higher food prices, drifting away from its end-year inflation target of 6.5%. A significant depreciation of the local kwacha currency has also increased inflationary pressures.

The central bank expects inflation to ease to 7.3% in the current quarter due to an anticipated improvement in food supply (the country expects to produce 32.3% more maize this year) and the effects of the recent monetary tightening. Upside risks to the inflation outlook include further depreciation of the kwacha and cost push factors, emanating from the recent increase in fuel prices. Zambia's Energy Regulation Board (ERB) adjusted the pump price of petroleum products last month by between 7.22% and 9.54%.

Zambia, whose economy is highly dependent on copper production and exports, has been hit by a slide in global copper prices, which has contributed to the depreciation of the kwacha.

The next MPC meeting to review the Bank of Zambia policy rate will be held on August 7, 2014.