Zambia’s central bank is expected to announce its latest monetary policy decision on Wednesday, as easing inflation strengthens expectations that policymakers could extend a cautious cycle of monetary loosening.
Annual consumer inflation slowed to 9.4 percent in January, down from 11.2 percent in December, returning to a downward trend after recent volatility. The moderation has been largely driven by a firmer kwacha, which has helped reduce the cost of imported goods, economists said.
The decline comes after the Bank of Zambia (BoZ) cut its Monetary Policy Rate (MPR) by 25 basis points in the fourth quarter of 2025, lowering the benchmark rate to 14.25 percent. Analysts say the continued slowdown in prices could provide room for further easing, although caution remains due to inflation risks.
BoZ Governor Denny Kalyalya said at the previous policy briefing that the monetary policy committee opted for the rate cut as inflation showed sustained signs of moderation.
“The Committee decided to lower the MPR in view of the decline in inflation,” Kalyalya said at the time.
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He noted that inflation fell sharply in the third quarter of 2025, dropping to 12.3 percent in September from 14.1 percent in June, before easing further to 11.9 percent in October. The decline was supported by a stronger currency and a bumper maize harvest, which helped reduce food prices.
Despite the recent gains, the central bank has warned that inflationary pressures remain elevated. Kalyalya cautioned that inflation is still above the BoZ’s target range and that market expectations remain high.
“This notwithstanding, the Committee was also mindful that inflation is still above the target band and market expectations of inflation remain elevated,” he said.
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Reflecting these risks, the BoZ has revised its 2025 inflation outlook upward to an average of 13.8 percent, compared with an earlier forecast of 13.3 percent.
With inflation now back in single digits for the first time in several months, financial markets and businesses are closely watching whether policymakers will deliver another rate cut to support economic growth. Zambia’s economy continues to recover from successive price shocks linked to currency volatility, global commodity prices and domestic supply constraints.
Economists remain divided on the outcome of the upcoming meeting, with some expecting a modest reduction to stimulate credit and investment, while others anticipate the central bank will hold rates steady to consolidate recent gains in price stability.
The BoZ’s decision will be closely scrutinised for signals on the pace and direction of monetary policy as Zambia balances inflation control with growth support.
