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Zambia May 2014 Inflation Unchanged At 7.8%

According to data released this morning by the Central Statistics office, inflation for May 2014 remained unchanged from the previous month rate of 7.8%. Inflation looks to have stabilized at the beginning of the second quarter following monetary tightening measures by the central bank in the first quarter of this year - policy rate up to 12%, reserve ratio up to 14% and some direct forex intervention. Fuel price increments from April 2014 did not make an immediate impact like they did over the same period last year.

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The month of April recorded a trade surplus of K43m, down 46.2% from a revised March 2014 surplus of K79.9m. The trade surplus has been on the decline since February 2014 after hitting a high of K296m in January - a period which has also seen copper prices (copper account for over 70% of export earnings) decline to as low as $6,400 per MT and bounce back to an 11 week high of $6,944 per MT yesterday on the London Metal Exchange.

Higher copper prices could help reverse the recent Kwacha losses which saw the currency breach K7 per US$ yesterday but would also need to be coupled with higher FDI inflows in order to have a significant effect.