- Decision
- Maintain
- Rate change
- 0 bps
- Policy rate after decision
- 6.5%
The Monetary Policy Committee (MPC) of the Central Bank of Lesotho (CBL) held its policy rate at 6.50% per annum, citing contained inflation and strong reserve buffers while warning that the global oil shock could intensify price pressures and that the domestic economy remains below potential. Over the past year, the CBL held the rate at 7.25% in March 2025, cut it by 25 basis points to 6.75% in August and by a further 25 basis points to 6.50% in November, then held it in January 2026. The MPC maintained a modest negative differential of 0-50 basis points against the South African Reserve Bank repo rate to sustain the exchange-rate peg and support economic activity. Headline inflation eased to 2.7% in February, although the medium-term outlook was revised higher, while the Composite Indicator of Economic Activity recorded modest growth in January and private-sector credit continued to expand. Net International Reserves stood at USD 1.125 billion on March 18, above the minimum threshold and sufficient for 4.3 months of imports. The Middle East conflict and closure of the Strait of Hormuz drove crude oil prices sharply higher, shifting the global outlook toward rising stagflation risks. Future decisions will remain data-dependent, with the MPC monitoring energy prices, inflation, capital flows and the external position to safeguard reserves and 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.