Stable Inflation, Strong Kwacha Drive Shift


Bank of Zambia cuts policy rate to 13.25% as inflation returns to target band and economic conditions improve.

By Francis Maingaila ♥️
Lusaka, Zambia24  --- (13-05-2026) -- Zambia’s economy is stabilising and showing clear improvement, especially on inflation and the exchange rate, which has allowed the Bank of Zambia to slightly reduce interest rates to support economic activity.

Bank of Zambia Governor said inflation has declined sharply and is now firmly within the target range, supporting the policy decision to ease the Monetary Policy Rate.

Dr. Kalyalya said inflation fell to 7.1 percent in March 2026, down from 11.2 percent in December 2025, and further eased to 6.8 percent in April 2026, remaining within the 6–8 percent target band.

He said inflation averaged about 7.1 percent in the first quarter of 2026, compared to 11.2 percent in the last quarter of 2025, reflecting a clear disinflation trend.


Dr. Kalyalya said the decline was mainly driven by base effects in maize grain and related food products, which continued to ease pressure on prices.

He said inflation is expected to remain within the target band over the forecast horizon, averaging 6.8 percent in 2026, compared to 6.9 percent in the previous forecast. He added that it is projected to moderate to 6.1 percent in 2027, before edging up to 6.6 percent in early 2028.

Dr. Kalyalya said the outlook is supported by expectations of lower maize prices due to a favourable harvest in the current crop marketing season.

He warned that global risks remain, particularly the escalation of the Middle East conflict, which has pushed up global oil prices and could raise fuel inflation pressures.

However, he said these risks have been partly contained by government tax relief measures, including the suspension of excise duty and zero-rating of VAT on petroleum products for a limited period.

Dr. Kalyalya said despite these risks, the combination of a favourable maize harvest outlook and a relatively stable Kwacha/US dollar exchange rate strongly supports a cautious easing of monetary policy.

He said it was on this basis that the Committee decided to reduce the Policy Rate by 25 basis points to 13.25 percent.

Dr. Kalyalya said the forecast covers the next eight quarters and will be updated as new macroeconomic data becomes available, including the full 2026 outlook to be published on the Bank of Zambia website.

He said the decision reflects the Bank’s continued commitment to maintaining price stability while supporting economic growth under evolving global conditions.

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