By 
The Bank of Zambia (BoZ) has reduced the Monetary Policy Rate (MPR) by 0.25 percentage points, bringing it down from 14.5 percent to 14.25 percent for the fourth quarter of 2025.
The Central Bank has also withdrawn about K13.7 billion worth of old currency from circulation, leaving approximately K3.1 billion in the market.
Speaking during the fourth quarter monetary policy media briefing in Lusaka on Wednesday, BoZ Governor, Dr. Denny Kalyalya, said the decision to lower the MPR was driven by the decline in inflation.
Kalyalya noted that inflation had declined further in the third quarter, with projections indicating a faster deceleration towards the lower bound of the target band over the forecast horizon.
“This notwithstanding, the Committee was also mindful that inflation is still above the target band and market expectations of inflation remain elevated,” he said.
He added that the downward trajectory in inflation accelerated in the third quarter, dropping to 12.3 percent in September from 14.1 percent in June. In October, inflation fell further to 11.9 percent, mainly due to the continued appreciation of the Kwacha against the US dollar and the impact of a bumper maize harvest, which led to lower prices of maize grain and meal.
“The inflation outlook for 2025 has been revised upward to an average of 13.8 percent from 13.3 percent projected in August,” Kalyalya highlighted.
He attributed the upward revision to the slower-than-expected decline in food prices. However, from the second half of 2026 to the end of the forecast period, inflation is projected to decelerate faster than previously anticipated, averaging 7.6 percent compared to 7.7 percent projected in August.
“In 2027, inflation is projected to move closer to the lower bound of the 6–8 percent target band, averaging 6.6 percent over the first three quarters of the year,” he said.
Kalyalya identified key contributing factors as the lagged effects of the Kwacha’s appreciation against the US dollar, lower fuel prices, and a downward adjustment in electricity tariffs for residential customers.
Read More: True to prediction, Bank of Zambia holds lending rate at 14.5% as inflation eases
He added that risks to the inflation outlook remained supportive of lower inflation.
“These include the favourable weather forecast for the current farming season, improved external sector conditions reflected in higher copper export earnings and subdued crude oil prices, and the observed easing of geopolitical tensions,” he said.
Kalyalya emphasized that despite the decline, inflation remained above the target band and inflation expectations, though lower, remained elevated.
“Taking all the above factors into account, the Committee adopted a cautious approach and decided to reduce the Policy Rate by 25 basis points to 14.25 percent,” he said.
He added that future decisions on the Policy Rate would continue to be guided by inflation outcomes, forecasts, and risks, including those related to financial stability.
Meanwhile, BoZ announced that Zambia’s international foreign exchange reserves currently stood at US$5.2 billion, representing 5.2 months of import cover.
WARNING ! All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express permission from ZAMBIA MONITOR.
Comments