Zambia's central bank raised it key interest rate for the second time, saying this would "help steer inflation to single digits in 2022 and to within the 6-8 percent target range by mid-2023..."

The Bank of Zambia (BOZ) raised its monetary policy rate by 50 basis points to 9.0 percent and has now raised it by 1 percentage point this year following a similar-sized rate hike in February.

Zambia's inflation rate eased for the third month in a row to 21.1 percent in October from a 2021-high of 24.6 percent in July for an average 23.7 percent in the third quarter, largely due to a rise in food inflation to 30.8 percent due to supply constraints for meat and poultry products, the bank said.

"Although inflation is projected to decelerate sharply over the forecast horizon, it will still be above the upper bound of the 6-8 percent range," BOZ said, adding upside risks to the outlook include a possible rise in fuel pump prices and electricity to restore fiscal sustainability as well as a predicted fourth wave of COVID-19, which could disrupt supply chains and trigger price increases.

BOZ forecast average 2021 inflation of 22.6 percent, then 15.0 percent in 2022 and 9.3 percent in the first three quarters of 2023.

The recovery of Zambia's economy is continuing though the third wave of the pandemic led to subdued economic activity, the bank said.

BOZ forecast 3.3 percent growth in 2021 and then accelerate to 3.5 percent in 2022 and 3.7 percent in 2023.

"The new waves of COVID-19, amidst the low vaccination rate, are a key downside risk to the growth outlook," the central bank said.