BoZ Holds at 14.5%: Discipline Over Headlines
Today's decision by the Bank of Zambia to hold the Monetary Policy Rate at 14.5 per cent is a brave and justified call in light of current inflation dynamics and the structural challenges ahead. It aligns closely with what I noted earlier this month, that "until inflation is back in range, cuts risk undoing what little progress we have made," and demonstrates the kind of policy discipline needed to consolidate gains.
As the MPC itself put it: "The positive developments notwithstanding, the Committee noted that at its current level, inflation is still well above the 6–8 per cent target band. In addition, while market expectations of inflation have moderated, they are still quite elevated relative to the target band."
Inflation has indeed moderated, dropping to 13.0 per cent in July from 16.5 per cent in March, aided by stronger maize supply, lower fuel prices, and kwacha appreciation. However, with inflation still 500 basis points above target and risks lingering from global trade tensions, geopolitical uncertainty, and the lagged effects of exchange rate pass-through, holding the line now safeguards both credibility and hard-won gains.
From a policy credibility standpoint, this decision signals two critical things:
Anchoring expectations: By keeping rates unchanged while inflation remains well above target, the BoZ reinforces its inflation-fighting commitment, helping anchor medium-term expectations and protect real returns on savings.
Avoiding premature easing: Cutting too soon could erode recent disinflationary gains, weaken the currency, and undermine both purchasing power and investor confidence.
Such restraint reflects more than short-term price stability. It builds the foundations for sustainable growth, shields households from further erosion of real incomes, and secures the policy space for future rate cuts that policymakers earn rather than gamble.
The BoZ's decision embodies disciplined, forward-looking monetary policy: anchored in reality, insulated from short-term political cycles, and guided by a clear-eyed reading of risks. The Bank's decision today is not just prudent, it is necessary.
Dean N Onyambu is the Founder and Chief Editor of Canary Compass, a co-author of Unlocking African Prosperity, and the Executive Head of Treasury and Trading at Opportunik Global Fund (OGF), a CIMA-licensed fund for Africans and diasporans (Opportunik). Passion and mentorship have fueled his over 17-year journey in financial markets. He is a proud former VP of ACI Zambia FMA (@ACIZambiaFMA) and founder of mentorship programs that have shaped and continue to shape over 50 financial pros and counting! When he is not knee-deep in charts, he is all about rugby. His motto is exceeding limits, abounding in opportunities, and achieving greatness. #ExceedAboundAchieve
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