- Decision
- Raise
- Rate change
- 25 bps
- CBL rate
- 7%
The Monetary Policy Committee of the Central Bank of Lesotho (CBL) raised the CBL Rate by 25 basis points to 7.00% per annum, citing increased upside inflation risks and tighter regional and global financial conditions despite contained inflation, weak domestic demand and an adequate external position. Over the past year, the rate was cut by 25 basis points to 6.50% in November 2025, held through March 2026, raised by 25 basis points to 6.75% in May and held in July. The new rate maintains a 25-basis-point differential to the South African Reserve Bank’s 7.25% policy rate, which the committee considers sufficient to sustain the exchange-rate peg and support domestic activity. Inflation eased to 2.6% in August and is projected to rise to 4.7% in 2027, while growth is expected to remain modest in 2026 before gradually picking up over 2027-2028; private-sector credit increased in July, but banking-sector liquidity remained adequate and demand pressures limited. Net international reserves remained above their target floor, with import cover at 5.6 months in the second quarter. Conflict-related energy and shipping disruptions pushed crude oil above USD 100 per barrel, raising global inflation risks and weighing on growth. Future decisions will remain data-dependent, with the committee ready to act decisively to defend the peg, safeguard reserves and preserve 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.