Two hundred and fifty basis points: the Bank of Zambia delivers its biggest cut in more than a decade

The polled number was twenty-five. The delivered number was two hundred and fifty. The Bank of Zambia's Monetary Policy Committee, meeting on Monday and Tuesday, cut the Monetary Policy Rate by 250 basis points to 10.75 per cent — the fourth consecutive reduction, the largest single cut in more than a decade, and ten times what economists surveyed by Reuters had expected. Announced on Wednesday, it is the loudest signal yet that the central bank believes the inflation fight has turned.

The case for the move is written in three numbers. Inflation eased to 6.1 per cent in September, from 6.2 in August — the lowest reading since February 2018 and a long fall from the double digits of the adjustment years — holding inside the 6-to-8-per-cent target band and close to its floor. The maize harvest came in at a record 4.9 million tonnes for the 2025/26 season, pressing food prices down from the supply side. And the kwacha, nearly a fifth firmer than a year ago on the back of mining export earnings and improved foreign-exchange liquidity, has done the same from the import side. Cheaper food, a steadier currency and tight policy, compounded over four meetings, have bought the committee room it has not had in years.

"The decision also reflects the need to align the monetary policy stance with the improved inflation outlook and is supportive of the national growth agenda," Governor Denny Kalyalya's statement said. The bank now expects inflation to average 6.7 per cent in 2026 — a tick below its previous 6.8 — to moderate to 6.0 per cent in 2027, and to edge up to 6.3 per cent in the first half of 2028. Whether the cut reaches a borrower's letter depends on the commercial banks: lower policy rates feed through to lending rates slowly and unevenly, and a cut this large can also thin the kwacha's yield attraction if investors read it as over-eagerness. The committee is wagering they will read it as confidence instead.

The risk section of its own statement reads like a preview of the month's news. The bank warned that an anticipated strong El Niño could disrupt agricultural production and electricity generation, pushing food and energy prices back up; the Ministry of Agriculture is already telling farmers in Northern Province to prepare. It flagged higher international oil prices and a prolonged Middle East conflict as a risk to any economy that imports its fuel. And it cited tighter global financial conditions that could pressure capital flows and the exchange rate. Hours after the statement, the ERB published a fuel review that restores excise duty and lifts pump prices by nearly a quarter — the single biggest one-month shock to the price chain since the waiver began. The October inflation print will now test how much of September's disinflation was structural, and how much was the tax holiday the central bank had been quietly counting.

Context flatters the decision even so. The bank enters this easing cycle with gross international reserves of US$5.2 billion — 5.2 months of import cover at the end of last year — a record maize crop, growth of 7.2 per cent in the second quarter and a government targeting an average of 7 per cent over the next three years. A 250-point cut is a claim that the stabilisation phase is over and the growth phase has begun. The same claim, made in the same week, is why the Treasury let the fuel excise return. October will grade both papers at once.

Sources: Bank of Zambia MPC statement and announcement (30 Sep 2026); Business Day/Reuters, "Zambia cuts interest rate to 10.75% as inflation eases" (30 Sep 2026); Trading Economics Zambia interest-rate record (30 Sep 2026); ZamStats CPI bulletins (Sep 2026); Lusaka Times, "MPR Cut to 10.75%" and "Farmers advised to prepare for anticipated El Nino" (Sep 2026); Ministry of Finance budget address on reserves (Feb 2026).