Bank of Zambia Surprises With 250-Basis-Point Rate Cut as Inflation Falls to 2018 Low
Zambia's central bank unveiled a much larger than expected interest-rate cut on Wednesday, lowering its monetary policy rate by 250 basis points to 10.75 per cent from 13.25 per cent, as inflation fell to its lowest level since 2018.
The move caught markets off guard: economists polled by Reuters had predicted only a 25-basis-point reduction. Governor Denny Kalyalya told a press conference in Lusaka that the decision was driven by the need "to align the monetary policy stance with the inflation outlook," adding that price pressures were well anchored.
Inflation anchored near target floor
Annual inflation softened to 6.1 per cent in September from 6.2 per cent the previous month — the lowest reading in eight years and close to the bottom of the central bank's 6–8 per cent target range. It was the fourth consecutive meeting at which the Bank of Zambia lowered rates, though previous reductions were far smaller.
The central bank also trimmed its inflation forecasts, now seeing price growth of 6.7 per cent in 2026 (down from 6.8 per cent) and 6.0 per cent in 2027 (down from 6.1 per cent). It expects the economy to grow 5.3 per cent this year and 6.0 per cent in 2027.
New IMF talks under way
Separately, Zambia has begun talks with a visiting International Monetary Fund mission over a new support programme, after its previous $1.7 billion arrangement ended in January. The outcome of those negotiations will be watched closely by bondholders, given the country's recent history of debt distress and restructuring.
The aggressive cut puts Zambia at odds with the cautious stance of many emerging-market central banks, but signals that Lusaka believes its long battle with inflation is firmly being won.
Sources: CNBC Africa (Reuters)
Zambia's central bank unveiled a much larger than expected interest-rate cut on Wednesday, lowering its monetary policy rate by 250 basis points to 10.75 per cent from 13.25 per cent, as inflation fell to its lowest level since 2018.
The move caught markets off guard: economists polled by Reuters had predicted only a 25-basis-point reduction. Governor Denny Kalyalya told a press conference in Lusaka that the decision was driven by the need "to align the monetary policy stance with the inflation outlook," adding that price pressures were well anchored.
Inflation anchored near target floor
Annual inflation softened to 6.1 per cent in September from 6.2 per cent the previous month — the lowest reading in eight years and close to the bottom of the central bank's 6–8 per cent target range. It was the fourth consecutive meeting at which the Bank of Zambia lowered rates, though previous reductions were far smaller.
The central bank also trimmed its inflation forecasts, now seeing price growth of 6.7 per cent in 2026 (down from 6.8 per cent) and 6.0 per cent in 2027 (down from 6.1 per cent). It expects the economy to grow 5.3 per cent this year and 6.0 per cent in 2027.
New IMF talks under way
Separately, Zambia has begun talks with a visiting International Monetary Fund mission over a new support programme, after its previous $1.7 billion arrangement ended in January. The outcome of those negotiations will be watched closely by bondholders, given the country's recent history of debt distress and restructuring.
The aggressive cut puts Zambia at odds with the cautious stance of many emerging-market central banks, but signals that Lusaka believes its long battle with inflation is firmly being won.
Sources: CNBC Africa (Reuters)
