LUSAKA, Feb 12 (Reuters) – Zambia’s central bank raised its main lending rate for the second meeting in a row to try to bring down inflation, which climbed last year because of the worst regional drought in living memory.

The 50-basis-point hike in the Bank of Zambia’s Monetary Policy Rate took it to 14.50%, its highest level since 2016.

Annual inflation stood at a more than three-year high of 16.7% in January, well above the central bank’s 6%-8% target range.

Bank of Zambia Governor Denny Kalyalya told reporters the bank needed to act to “adjust that feeling that inflation will continue to go up”.

Inflation is projected to average 14.6% this year, whereas at the central bank’s last monetary policy meeting in November the forecast was for average inflation of 13.9%.

Zambia’s economic growth slowed in 2024 because of the effects of the severe drought, but it is expected to rebound this year.

A presentation by Kalyalya gave a 6.6% economic growth forecast for 2025, the same rate targeted in the finance minister’s September budget speech.

The El Nino-induced drought wiped out crops and caused hydroelectric power generation on the Kariba dam, Zambia’s biggest power source, to plummet last year, spurring food and power imports.

Recent rains have since improved the outlook for agriculture and power generation.

A major copper producer, Zambia also hopes its mining sector will contribute to economic recovery.

(Reporting by Chris Mfula; Writing by Sfundo Parakozov; Editing by Alexander Winning and Barbara Lewis)