- Decision
- Maintain
- Rate change
- 0 bps
- CBL rate
- 7.25%
The Central Bank of Lesotho’s Monetary Policy Committee left the CBL rate unchanged at 7.25 percent at its 25 March 2025 meeting, judging this level appropriate amid a pickup in domestic inflation and a sharp contraction in January output alongside heightened global uncertainty. The decision follows a 25 bp rate cut in February that brought the policy rate to its current level. The Committee also kept the net international reserves (NIR) target floor at USD 840 million and reiterated that banks’ prime lending rates should not exceed the CBL rate by more than 350 bp. At home, output fell 4.5 percent m/m in January and 2025 growth is forecast to slow to 2.1 percent, while inflation rose to 4.1 percent in February from 3.6 percent in January and is projected to average 5.2 percent this year; broad money contracted 2.5 percent in January even as business credit continued to expand. The external accounts showed a 22.1 percent-of-GDP fiscal surplus in January on strong SACU receipts, although NIR slipped by USD 105.2 million to USD 998.9 million on commercial-bank outflows. Globally, the Committee highlighted sustained consumer demand in Asia and South Africa but warned that trade tensions, geopolitical conflicts and commodity-price volatility pose downside risks. The MPC said it will keep monitoring international developments and the reserve position and stands ready to adjust policy if 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.