(Bloomberg) --

Zambian inflation slowed to an almost two-year low in January, giving the central bank room to leave interest rates on hold next month.

Consumer prices rose 15.1% from a year earlier, compared with 16.4% in December, interim Statistician-General Mulenga Musepa told reporters Thursday in Lusaka, the capital. That’s the lowest level since March 2020.

The falling inflation rate will enable the central bank, which targets price growth within a range of 6% to 8%, to leave borrowing costs unchanged at its next policy announcement on Feb. 16. That’s as it continues to assess the impact of a 50 basis-point increase in November and the removal of fuel subsidies the following month.

A 6.7% depreciation in the kwacha against the dollar this year, the removal of fuel subsidies and an anticipated 13% increase in power tariffs in March will likely place upward pressure on prices in coming months.

Zambia raised gasoline prices last month to help secure International Monetary Fund board approval for a bailout this year. 

Read more: Zambia Cuts Fuel Subsidies Ahead of IMF Deal, Raising Pump Price

The government is seeking $1.4 billion from the IMF, and the central bank is likely to hold rates until the deal is finalized, said Trevor Hambayi, a Lusaka-based independent economist. Fitch Solutions analysts, led by Jane Morley, head of sub-Saharan Africa country risk, project that monetary policy makers will raise interest rates by 100 basis points this year.

Food-price growth slowed to 16.9% in January, compared with 19.9% in the previous month, and non-food inflation accelerated to 12.7 from 12.1%, driven by increases in pump and transport prices. Costs rose 2.6% in the month. That’s the highest level in a year.

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