The Bank of Zambia (BoZ) has kept its key lending rate unchanged at 14.5% for the second consecutive time, opting to consolidate gains in the fight against inflation despite improving macroeconomic conditions.
The central bank announced the decision in a press statement on Wednesday following its third monetary policy meeting of the year.
“At its August 11–12, 2025, Meeting, the Monetary Policy Committee (MPC) decided to maintain the Monetary Policy Rate at 14.5 percent,” the statement said.
The decision aligns with similar moves by Egypt and Nigeria, which also held borrowing costs steady at their most recent policy meetings amid domestic price pressures and global market uncertainties.
Nigeria left its benchmark rate at 27.5% for the third consecutive time this year, while Egypt held its overnight lending rate at 25%, marking its first pause since February.
Policy caution remains despite cooling inflation
Zambian’s annual inflation has been on a steady decline since April, easing from 16.5% to 13.0% in July — the lowest in nearly two years.
The BoZ attributed the drop to “improved supply of maize, lower fuel prices, and the appreciation of the kwacha against major currencies.”
The currency has gained 20% against the US dollar so far this year, ranking among the world’s best performers tracked by Bloomberg.
Despite the slowdown, inflation remains well above the 6–8% target band.
“While recognising these positive developments, the Committee noted that at the current level, inflation is well above the 6–8 percent target band, and at the same time, uncertainties associated with global trade policies and persistent geopolitical tensions remain,” the bank noted.
It added that although inflation expectations have moderated, they “remain high relative to the target band.”
However, the BoZ now sees inflation entering the target range in the first quarter of 2026, earlier than previously forecast, with an average of 7.7% expected in 2026 and stability maintained into mid-2027.
Higher copper prices, bumper harvest strengthen recovery
Zambia, Africa’s second-largest copper producer, is staging a strong recovery after its 2020 debt default and a severe drought that crippled agriculture and power generation. The rebound is being fuelled by surging copper output and prices.
Copper prices reached a record $5.6 per pound in July, following a 30% year-on-year rise in local production in the first quarter of 2025. The gains have boosted export revenues and provided further support to the kwacha.
Food prices have also eased, helped by a bumper maize harvest in the 2024/2025 farming season.
Official data put the crop at 3.66 million tonnes — more than double last year’s output — after favourable rains broke the cycle of drought.
Despite the improving outlook, the International Monetary Fund said earlier this month that the BoZ may still need to consider further policy tightening to anchor inflation expectations and safeguard monetary credibility.
With the next MPC meeting set for November 10–11, investors are watching to see whether the central bank maintains its cautious stance or shifts towards easing.
