- Decision
- Lower
- Rate change
- 25 bps
- CBL rate
- 6.75%
The Central Bank of Lesotho’s Monetary Policy Committee lowered the CBL rate by 25 bp to 6.75 % per annum, citing a fragile but improving domestic recovery, easing inflation and scope created by the South African Reserve Bank’s recent rate cut, while stressing the need to safeguard the loti-rand peg. Following a 25 bp reduction in February that took the rate to 7.25 %, the cumulative easing this year now totals 50 bp. To reinforce the exchange-rate anchor, the Committee raised the net international reserves (NIR) target floor by USD 10 m to USD 840 m and reminded banks that prime lending rates should not exceed the CBL rate by more than 350 bp. Annual consumer inflation slowed to 4.3 % in June from 4.4 % in May and is projected to stay contained, though imported price pressures from South Africa remain a risk; economic activity showed modest May recovery driven by private consumption and textile exports but faces headwinds from weaker external demand, higher trade costs and mining-sector challenges. The fiscal deficit stood at 4.4 % of GDP in May, public debt eased to 54.8 % of GDP, and SACU inflows lifted NIR to USD 1.12 bn by 22 July. Globally, the IMF has nudged up its 2025 growth forecast to 3 %, yet trade disruptions and geopolitical risks keep the outlook uncertain. The MPC reaffirmed its commitment to maintaining adequate reserves and stands ready to adjust policy if threats to the peg or price stability escalate.
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.