“Rate Cut Signals Confidence in Zambia’s Economy” BOZ

 By Daily News Reporter

For homeowners, investors, and businesses alike, the Bank of Zambia’s latest move is more than just a technical adjustment — it’s a signal of confidence in the country’s economic trajectory.

The Bank of Zambia held its Monetary Policy Committee (MPC) in Lusaka, the central bank reduced the Monetary Policy Rate (MPR) by 75 basis points, bringing it down to 13.5 percent from 14.25 percent. 

Speaking during the MPC update Bank of Zambia Governor Dr. Denny Kalyalya explained that the decision reflects a commitment to maintaining an appropriate monetary stance while supporting growth.

Inflation has been steadily easing, falling from 12.3 percent in September 2025 to 11.2 percent in December, and further to 9.4 percent in January 2026. Dr. Kalyalya attributed this decline to a bumper maize harvest and the appreciation of the Kwacha against major currencies.

With these gains, the central bank now expects inflation to reach its 6–8 percent target band faster than previously forecast, with the lower bound likely by the second quarter of 2027. Average inflation is projected at 6.9 percent in 2026, down from the earlier forecast of 7.6 percent, and 6.3 percent in 2027.

Dr. Kalyalya further pointed to favourable weather conditions, higher copper prices, and continued macroeconomic stability as key factors underpinning the positive outlook.

“We remain guided by inflation outcomes, forecasts, and identified risks, including those associated with financial stability,” he said.

For households, the rate cut could translate into lower borrowing costs, easing pressure on mortgages and loans. For businesses, it signals a more accommodative environment aimed at stimulating investment and expansion. And for the broader economy, it reflects growing confidence that Zambia is on a path toward sustainable stability.

The MPC’s decision underscores a delicate balancing act: supporting growth while keeping inflation in check. For now, the central bank’s message is clear — Zambia’s economy is turning a corner, and policy is adjusting to match that optimism.

Meanwhile the EAZ has recommended the central bank for its disciplined approach in anchoring inflation expectations through transparent communication and data-driven policy actions, which it said have strengthened confidence in financial markets.