- Decision
- Lower
- Rate change
- 25 bps
- CBL rate
- 7.25%
The Monetary Policy Committee (MPC) of the Central Bank of Lesotho cut the CBL rate by 25 bp to 7.25 percent per annum and simultaneously raised the net international reserves (NIR) target floor to USD 840 million from USD 770 million, citing easing domestic inflation and the need to safeguard the loti-rand peg amid a shifting regional policy stance. To implement the decision, the MPC emphasised maintaining a strong reserve buffer, noting that NIR had already risen by about USD 42 million since the previous meeting, giving 4.7 months of import cover. Annual consumer inflation slowed to 3.7 percent in December 2024 from 4.4 percent in November, helped by lower food and fuel prices and a stronger currency, while economic activity expanded an estimated 3.1 percent year-on-year in November, supported by firm domestic demand and exports; broad money and private-sector credit both grew in Q4. Externally, higher SACU receipts bolstered reserves, though the current account was not discussed. The MPC highlighted IMF projections of 3.3 percent global growth in 2025-26 but flagged persistent risks from protectionism, geopolitics and commodity-price pressures, and said it will keep monitoring global developments and the reserve position and adjust policy as needed.
Rate evolution
Over the period covered, the Central Bank of Lesotho lowered the policy rate by 75 basis points from 7.25% to 6.50%, shifting from an initial hold to easing, with a pause in September, another cut in November and holds in January and March 2026, before raising it by 25 basis points in May, holding it in July and increasing the CBL Rate by another 25 basis points to 7.00% in September. The initial March hold reflected modest growth, a January contraction, moderate inflation and heightened global uncertainty, while later easing was supported by contained inflation, a fragile recovery and South African Reserve Bank cuts, with decisions throughout anchored by the need to preserve the loti-rand peg through adequate reserves and close regional alignment.
In November, with the economy still subdued, headline inflation moderating, reserves improving and South Africa again easing, the Monetary Policy Committee cut the policy rate to 6.50% and raised the Net International Reserves target floor, while warning that domestic demand and inflation expectations remained elevated. On January 30, 2026, the committee held the rate at 6.50% as domestic activity rebounded, inflation eased to 4.1% in December 2025 and the South African Reserve Bank maintained its rate, and on March 27 it held again as inflation remained contained, reserve buffers stayed strong and the economy operated below potential. On May 29, the committee raised the policy rate to 6.75% after the South African Reserve Bank increased its repo rate to 7.00% and the global energy shock lifted the domestic inflation outlook, before holding the CBL Rate on July 24 as domestic activity weakened, reserves remained adequate to safeguard the peg and rising transport costs pushed inflation higher. On September 24, the committee raised the CBL Rate to 7.00% after the South African Reserve Bank increased its policy rate to 7.25%, citing increased upside risks to inflation and tighter regional and global financial conditions despite contained domestic inflation, weak demand and an external position adequate to support the peg, and judged the resulting 25-basis-point differential sufficient to sustain the peg and support domestic economic activity.