The MPC is part of the Bank of Zambia. It is responsible for setting the country’s policy (benchmark) interest rate, commonly called the Policy Rate, and guiding overall monetary policy.

It usually meets quarterly to review economic conditions and decide whether to adjust the Policy Rate, but it can meet more often if necessary.

Its main objective is to maintain price stability (control inflation) and ensure financial system stability.

How It Works — Key Elements

Policy Rate: This is the key interest rate signaled by the Bank of Zambia. It influences other interest rates in the economy, such as those on loans and deposits.

Transmission Mechanism: The Policy Rate affects the overnight interbank rate (the rate at which banks lend to each other overnight). Changes here ripple through to borrowing costs, exchange rates, inflation expectations, and economic activity.

Corridor: There is a band (±2 percentage points) around the Policy Rate within which the overnight interbank rate is allowed to move. The central bank uses various operations to keep the interbank rate close to the Policy Rate.

Other Tools: Besides the Policy Rate, the MPC and Bank of Zambia also use instruments like the statutory reserve ratio and short-term liquidity facilities for banks.

Recent and Current MPC Policy

As of August 2025, the MPC kept the Policy Rate at 14.50%.

Inflation has been trending downward, moving from around 14% in June 2025 to about 13% in July.

The decision to hold the rate steady reflects a cautious approach: keeping inflation under control while watching how the economy responds.

Challenges and Considerations

Inflation Pressure: High inflation remains a major concern, influenced by domestic factors like food and fuel prices as well as international developments.

Exchange Rate Volatility: Fluctuations in the kwacha affect import costs, which in turn influence inflation.

Balancing Growth and Stability: While high rates help tame inflation, they also make borrowing more expensive and can slow economic growth.

External Shocks: Shifts in global commodity prices, debt conditions, or supply chain disruptions can quickly change the outlook and force policy adjustments.