Zambia Slashes Policy Rate by 250bps to 10.75% as Inflation Nears Target Floor
By Aboki Forex —
Zambia’s central bank cut its monetary policy rate by 250 basis points to 10.75% from 13.25% on Wednesday, Sept 30, a much larger reduction than economists expected. The Bank of Zambia said inflation was well anchored and expected to remain near the bottom of its target range.
The cut was 10 times bigger than the 25 basis points predicted by economists. It was also the fourth consecutive reduction by the bank, though earlier cuts were smaller.
Inflation at Lowest Since 2018
Annual inflation softened to 6.1% in September from 6.2% in the previous month. That is the lowest level since 2018 and close to the base of the central bank’s 6%-8% target range.
The central bank marginally lowered its inflation forecasts from its previous meeting in May. It now sees inflation of 6.7% in 2026, down from 6.8%, and 6.0% in 2027 from 6.1%.
IMF Talks and Growth Outlook
Zambia has started talks with a visiting International Monetary Fund mission over a new support programme. The discussions follow the end of its previous $1.7 billion arrangement in January.
Governor Denny Kalyalya told a press conference that the need to align the monetary policy stance with the inflation outlook influenced the rate decision.
The central bank expects the economy to grow 5.3% in 2026 and 6.0% in 2027.
What It Means
A 250 basis point cut equals 2.5 percentage points. The sharper-than-expected move reflects confidence that price pressures are contained. For businesses and consumers in Zambia, lower borrowing costs could support spending and investment if inflation stays within target. The IMF talks will also be watched for signs of fresh external support for the economy.