The Bank of Zambia has cut its Monetary Policy Rate by 250 basis points to 10.75 percent as inflation continues to ease, giving the central bank more room to support economic activity.
The latest reduction marks the fourth consecutive rate cut by the central bank as price pressures have moderated.
Zambia’s annual inflation fell to 6.1 percent in September, down from 6.2 percent in August. The figure is the country’s lowest inflation rate since February 2018 and places inflation within the Bank of Zambia’s 6–8 percent target range. (Trading Economics)
Bank of Zambia Governor Denny Kalyalya said the decision was driven by lower inflation and an improved economic outlook.
He said the lower policy rate is expected to feed through to other interest rates, potentially supporting economic activity while keeping monetary policy aligned with the inflation outlook. (ZNBC)
The decline in inflation has been supported by lower food prices and a stronger Zambian kwacha. The currency appreciated by 8.3 percent during the third quarter, while increased foreign exchange supply from the mining sector also helped ease pressure on prices. (ZNBC)
Food inflation eased to 5.8 percent in September from 6 percent in August, while non-food inflation remained at 6.6 percent.
However, policymakers still face risks to the inflation outlook. Temporary measures including the suspension of fuel taxes and zero-rating of value-added tax were due to expire at the end of September, which could put some upward pressure on prices. (Business Day)
The International Monetary Fund has also noted that Zambia needs to carefully manage monetary policy as it navigates higher fuel prices, global uncertainty and other economic pressures. (IMF)
The latest rate cut reflects the continued moderation in inflation, while giving businesses and consumers some potential relief from high borrowing costs.
