As projected by market intelligence, Bank of Zambia holds policy rate at 14.5%, cites inflation decline, currency stability

True to market intelligence, as exclusively reported by Zambia Monitor, The Bank of Zambia (BoZ) has maintained its benchmark lending rate at 14.5 percent, citing easing inflation and improved financial stability.

This marks the first time in 2025 the rate has been held steady, following a hike in February.

Speaking at a media briefing in Lusaka on Friday, BoZ Governor, Dr. Denny Kalyalya, said the Monetary Policy Committee (MPC) opted to keep the rate unchanged to support sustained macroeconomic stability.

“Maintaining the current monetary policy stance was deemed appropriate considering the recent decline in inflation to 16.5 percent in March 2025, from a peak of 16.8 percent in February, as well as stability in the financial system,” Kalyalya said.

Read more: Read more: Market intelligence suggests monetary policy rate to remain stable at 14.5 percent, as BoZ set to act

He explained that food inflation rose by 0.3 percentage points to 18.9 percent, but was offset by a 1.0 percentage point decline in non-food inflation, which fell to 13.2 percent.

Kalyalya said the drop in airfares and the prices of motor vehicles and detergents contributed significantly to the decrease.

Looking ahead, the BoZ projects inflation to ease more rapidly toward its target band of 6–8 percent, with average inflation expected to fall to 13.8 percent in 2025, down from 14.6 percent previously forecasted.

“In 2026, inflation is projected to decline further to 8.8 percent, and then to 7.5 percent in the first quarter of 2027, within our target range,” he added.

The projections are supported by BoZ inflation expectation surveys, which indicated continued moderation, driven by anticipated reductions in maize and crude oil prices.

According to Kalyalya, the upcoming bumper maize harvest—estimated at 3.6 million metric tonnes for the 2024/25 season, up from 1.5 million tonnes in the drought-hit 2023/24 season—will likely ease food prices significantly.

He also noted a global supply increase and subdued demand for crude oil, which could reduce energy costs and further curb inflation.

However, he warned that the positive effects of a bumper harvest could be undermined by poor post-harvest management.

Reports from the Ministry of Agriculture show that 30–40 percent of crops are typically lost due to post-harvest inefficiencies.

Analysts Predict Possible Easing Later in Year

Private Sector Development Association Chairperson, Yusuf Dodia, welcomed the BoZ’s decision, saying recent appreciation of the Kwacha supported a steady rate.

“With the kwacha appreciating against the dollar, I suspect the policy rate will remain unchanged or even slightly drop, depending on economic conditions,” Dodia said in a telephone interview on Thursday, May 22, 2025.

He emphasized that any adjustments to the rate would likely follow significant changes in inflation or exchange rates.

Economist, Webster Bwalya, echoed this view, attributing his confidence in a stable rate to the recent decline in inflation and the Kwacha’s firm performance.

“Typically, the monetary policy rate is adjusted in response to rising inflation. Since we are seeing some stability, it’s prudent to keep the rate at 14.5 percent to support economic growth,” he said.

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