The Bank of Zambia (BOZ) has reduced the Monetary Policy Rate (MPR) by 75 basis points to 13.5 percent for the month of February from 14.25 in last year’s quarter.
Announcing the Monetary policy rate reduction at a press briefing in Lusaka today, BOZ Governor Denny Kalyalya stated that the reduction is in response to decline in inflation in the fourth quarter of 2025.
He noted that in January 2026, inflation fell sharply to 9.4 percent and that the decline has largely been driven by the continued impact of the maize bumper harvest from the 2024/25 farming season and appreciation of the kwacha against major currencies.
“The current projection is that inflation will fall into the 6-8 percent target band at a faster pace than was forecast in November 2025,”he said.
Dr. Kalyalya added that inflation is expected to be within the band by the second quarter of 2026 and move to lower bound by the second quarter of 2027.
He said on average, inflation is forecast to be 6.9 percent in 2026 compared to 7.6 percent projected in November 2025.
The Governor stated that inflation is further expected to ease further to 6.3 percent in 2027.
He said the more positive outlook largely reflects the impact of lagged effects of the recent appreciation of the exchange rate and expected favourable agricultural output.
Dr. Kalyalya pointed that the risks to the inflation outlook remain tilted to the downside, which include favourable conditions; supportive external sector conditions, reflected in higher copper prices and continued macroeconomic stability.
He observed that in view of the recent sharp drop in inflation and projected further decline over the forecast horizon, improving market expectations of inflation and the need to maintain an appropriate monetary policy stance, the committee decided to reduce the policy rate by 75 basis points to 13.5 percent.
Dr. Kalyalya has since indicated that decisions on the policy rate will continue to be guided by inflation outcomes, forecasts, and identified risks, including those associated with financial stability.
