Bank of Zambia cuts its interest rate to 10.75%: what it means for prices, the kwacha and your money

Zambia's central bank has made borrowing cheaper, at least on paper. The Bank of Zambia's Monetary Policy Committee, meeting on 28 and 29 September, cut its benchmark interest rate by 250 basis points, or 2.5 percentage points, to 10.75 percent from 13.25 percent. The cut was announced on 30 September. It is the fourth cut in a row and the biggest in more than a decade. The reason is that prices are now rising far more slowly than a year ago, when inflation stood at 12.3 percent. Whether that helps ordinary Zambians depends on three things: whether the kwacha holds its value, whether the rains keep food prices down, and whether cheaper money turns into business growth and jobs. ## What a policy rate is, and what a cut does The policy rate is the Bank of Zambia's benchmark interest rate. It is the signal the central bank sends to commercial banks about the price of money. When it falls, borrowing is meant to get cheaper for banks, who are then expected to charge less to businesses and households, and the government is expected to pay less on Treasury bills and bonds. The hoped-for result is more lending, more investment and more jobs. The danger of cutting too early is that cheaper money pushes prices up again. That is why central banks cut only when inflation gives them room. The Bank says its Committee also wanted policy to match the improved inflation outlook, which it expects to support growth. ## Why the Bank says it can cut now Inflation, the rate at which prices rise, has fallen fast. Overall inflation was 6.1 percent in September, down from 6.5 percent in June and 7.1 percent in March. It is now inside the Bank's target band of 6 to 8 percent. In practical terms, goods that cost K100 a year ago now cost about K106. | End-period inflation (percent) | Overall | Food | Non-food | | --- | --- | --- | --- | | 2025 Q3 | 12.3 | 14.6 | 9.0 | | 2026 Q1 | 7.1 | 7.8 | 5.9 | | 2026 Q2 | 6.5 | 6.7 | 6.0 | | 2026 Q3 | 6.1 | 5.8 | 6.6 | The Bank credits two things: