- Decision
- Lower
- Rate change
- 25 bps
- cbl rate
- 6.5%
The Monetary Policy Committee of the Central Bank of Lesotho on 25 November 2025 reduced the CBL rate by 25 bp to 6.50 % per annum and raised the net international reserves (NIR) target floor to USD 860 m (from USD 840 m), citing subdued domestic activity, a moderate inflation outlook and the need to mirror the South African Reserve Bank’s recent 25 bp cut to 8.0 %. This continues an easing cycle that has lowered the policy rate by a cumulative 75 bp since February 2025. The higher NIR floor, underpinned by an increase in reserves to USD 860 m (about four months of import cover), is intended to safeguard the loti–rand peg. Headline inflation eased to 4.5 % y/y in October from 4.7 % in September on softer food and fuel costs and a firmer rand, while domestic demand and investment remained weak, leaving Q3 growth “mostly subdued”; inflation expectations are nevertheless described as persistently elevated. The fiscal balance posted a 1.0 %-of-GDP surplus on stronger water royalty and mining revenues, and improved SACU receipts and remittances helped narrow the external deficit. Global growth forecasts have been nudged higher, but the Committee highlighted risks from geopolitical tensions, trade frictions, financial vulnerabilities and asset re-pricing. The central bank pledged ongoing vigilance and stands ready to adjust policy as needed to protect the peg and maintain macroeconomic stability.
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.