- Decision
- Maintain
- Rate change
- 0 bps
- Policy rate after decision
- 6.5%
The Central Bank of Lesotho (CBL) held its policy rate at 6.50% per annum as inflation eased but was expected to remain elevated in the medium term, while domestic growth was projected to be modest. Over the past year, the CBL held the rate at 7.25% in March, cut it by 25 basis points to 6.75% in August and by another 25 basis points to 6.50% in November. The Monetary Policy Committee raised the net international reserves target floor to USD 860 million from USD 830 million to underwrite the loti-rand peg, while banks are expected to keep prime lending rates no more than 350 basis points above the CBL rate. Inflation declined to 4.1% in December 2025 and was projected at 4.7% over the medium term. Economic activity rebounded from October to November on stronger domestic demand, higher private-sector credit and financial-sector performance, although manufacturing and transport contracted. Net international reserves rose to USD 1.22 billion on Southern African Customs Union receipts, remaining comfortably above the target floor. The global growth outlook improved slightly and inflation was expected to moderate further, though trade tensions, geopolitical disruptions and fiscal vulnerabilities remained risks. The CBL said it would monitor global and regional developments and stood ready to safeguard the peg’s credibility.
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.