An Economist says the Bank of Zambia’s upcoming monetary policy decision will hinge on how it weighs declining inflation against exchange rate, fiscal and other economic risks.
Bank of Zambia’s policy rate currently stands at 13.25 percent, while annual inflation has eased to 6.2 percent, which is within the Central Bank’s target range of 6 to 8 percent.
Speaking in an interview with Money News, Kampamba Shula noted that the relative stability of the Kwacha could also provide some room for the Central Bank to consider easing monetary policy.
“So the big question going into tomorrow’s Bank of Zambia announcement is pretty simple. Do we see a cut, a hold, or a hike in the policy rate?” Mr. Shula said.
“Right now, the rate is at 13.25%. Our inflation has come down to 6.2%, comfortably within the Bank of Zambia’s 6% to 8% target range. The Kwacha has also been relatively stable.”
He stressed that the policy rate model is currently showing a slight bias towards a reduction in the policy rate.
“We ran some numbers and our policy rate model is showing a slight tilt towards a cut with a 41% probability compared with 30% for a hold and 29% for a hike,” he added.
Mr. Shula, however said the model signal should not be interpreted as a forecast of what the Bank of Zambia will announce.
He said the Central Bank’s decision will ultimately depend on its assessment of several factors, including the performance of the Kwacha, fiscal conditions and emerging risks.
“So while the numbers suggest there could be some room to ease, tomorrow’s decision will also depend on how the bank weighs the Kwacha, fiscal conditions, and other risks such as fuel waivers being removed,” Mr. Shula stressed.
On May 13, 2026, Bank of Zambia reduced its Monetary Policy Rate by 25 basis points to 13.25% for the second quarter of the year.
The Central Bank is this Wednesday expected to announce its benchmark lending rate for the third quarter of 2026.
