The Bank of Zambia trimmed its policy rate by 25 basis points to 8.75 percent on Wednesday, the third consecutive cut from the central bank as inflation pressures ease across the southern African economy.
The monetary policy committee met against a backdrop of global uncertainty following escalating tensions between Iran and Israel, but the bank pressed ahead with easing, signalling confidence that domestic price growth remains on a downward trajectory. The rate now sits at its lowest level since early 2022, when Zambia was still battling the aftermath of its 2020 debt default.
Governor Deon Kuipa told journalists after the decision that the bank would continue to monitor global developments closely. He said the committee recognised that while external shocks posed risks to the outlook, the local inflation picture justified further monetary relaxation. Year-on-year inflation in Zambia has fallen from double digits in recent years to single digits, with the central bank's latest forecast showing continued moderation.
The kwacha has stabilised somewhat in recent months following a tumultuous 2023 when the currency lost nearly a quarter of its value. Kuipa said the bank remained committed to supporting economic growth while maintaining price stability. He did not rule out further cuts if inflation continued its downward path, but said the committee would adjust its stance if external shocks translated into domestic cost pressures.
The decision reflects a broader shift among African central banks toward easing cycles as inflation cools. However, it also carries risks. Global markets remain volatile, oil prices could spike if Middle East tensions worsen, and currency pressures could quickly reverse if foreign investors lose appetite for emerging market assets.
Zambia still carries a heavy debt burden following its default and restructuring agreement with creditors. Any sharp currency depreciation would complicate debt servicing in dollar terms and potentially reignite inflation. The central bank will publish its next monetary policy decision in six weeks, when it will reassess inflation data, global conditions, and growth prospects.
