The Bank of Zambia has reduced its benchmark interest rate for the second consecutive meeting, cutting it to 13.5% from 14.25% as inflation shows clearer signs of moderation.
The decision was announced on Wednesday in Lusaka by Governor Denny Kalyalya following the Monetary Policy Committee (MPC) meeting.
The rate cut reflects growing confidence among policymakers that inflationary pressures are easing faster than earlier projected, supported by currency stability and improving macroeconomic conditions.
What the apex bank is saying
The Monetary Policy Committee said the decision was driven by sustained disinflation and improving economic fundamentals. The committee also projected that inflation would return to the Bank of Zambia’s 6% to 8% target band sooner than previously expected.
- Governor Denny Kalyalya said the Monetary Policy Committee was encouraged by the recent disinflation trend and improved macroeconomic conditions.
- The apex bank chief noted that while inflation is trending downward, risks remain, particularly from weather-related food supply shocks and external uncertainties.
The Governor added that improving fiscal discipline and steady foreign exchange reserves are expected to help anchor inflation expectations going forward.
Get up to speed
Inflation in Zambia had remained above the upper band of the central bank’s 6% to 8% target range since May 2019.
- Persistent currency volatility, rising food prices, and global supply chain shocks kept price pressures elevated for years, forcing the central bank to maintain a tight monetary stance.
- Inflation eased to 9.4% last month, dropping below the 10% threshold for the first time in nearly three years.
- The kwacha has rallied about 16% against the US dollar since the beginning of the year.
The currency’s appreciation has reduced the cost of imported goods such as fuel, machinery, and food products.
Restrictions on the use of foreign currency in domestic transactions and higher global copper prices have supported foreign exchange inflows.
The recent moderation in inflation marks a turning point after years of aggressive tightening aimed at stabilizing prices and restoring currency confidence.
What you should know
Zambia’s latest rate cut comes amid mixed monetary policy signals across African economies as central banks respond to evolving inflation dynamics.
- The Bank of Uganda recently retained its benchmark Central Bank Rate at 9.75%, citing a stable inflation outlook.
- The Central Bank of Nigeria is scheduled to hold its 304th Monetary Policy Committee meeting on February 23–24, 2026, with investors watching for policy direction.
- Zambia’s easing cycle is expected to lower borrowing costs for businesses and households, potentially stimulating credit growth and investment.
The country’s economic recovery is being supported by mining sector expansion and ongoing debt restructuring efforts.
