Bank of Zambia (BoZ) has cut its monetary policy rate by 25 basis points to 14.25 percent.
BoZ Governor Denny Kalyalya says that the cut is driven by the continued decline in inflation.
Mr Kalyalya stated that the rate reduction is likely to have a ripple effect on the country’s financial sector, influencing lending conditions and potentially leading to increased spending and investment.
The media reports that Mr Kalyalya made the announcement during a media briefing.
Mr Kalyalya explained that the decision was made with consideration to the downward trajectory of inflation in the third quarter, with inflation declining to 12.3 percent in September from 14.1 percent in June.
Mr Kalyalya indicated that inflation slowed to 11.9 percent in October 2025, from 12.3 percent in September and is projected to continue decelerating and might enter the 6-8 percent target range by the first quarter of 2026.
He attributed the positive inflation trend to a stronger kwacha against the US dollar, lower fuel prices, improved copper exports receipts and the impact of bumper harvest.
He added that by lowering the policy rate, commercial banks are also expected to reduce their lending rates, making credit more affordable for Zambians.
He explained that the BoZ’s decision strikes a balance between controlling inflation and promoting economic growth, and is seen as a proactive step towards achieving macroeconomic stability and fostering a conducive environment for economic development.
Mr Kalyalya’s announcement comes as the country grapples with persistent inflationary pressures, with the average inflation rate increasing to 16.3 percent in the fourth quarter of 2024.
The country’s economic growth has been affected by factors such as drought, global trade disruptions and geopolitical uncertainties.
