- Decision
- Lower
- Rate change
- 250 bps
- policy rate
- 27.5%
The Reserve Bank of Zimbabwe’s Monetary Policy Committee (MPC) cut the Bank policy rate by 250 basis points to 27.5% with immediate effect, citing benign inflation and strong growth prospects, while stressing that the move was a policy-rate realignment rather than monetary easing. The rate had been held at 35% through March before a 500-basis-point cut in June. The MPC also lowered the Targeted Finance Facility rate to 12.5%, capped banks’ all-inclusive on-lending rate to productive sectors at 22.5%, and left differentiated statutory reserve requirements unchanged. Annual ZiG inflation rose to 3.7% in September from 2.9% in August but is expected to remain below 7% at end-2026, while economic growth is projected at 5%, supported by mining and agriculture, and reserve money remained within targets agreed with the International Monetary Fund. Foreign-currency reserves backing ZiG exceeded USD2 billion, equivalent to about two months of import cover, while stronger inflows supported exchange-rate stability. Renewed international oil-price increases amid escalating Middle East conflict drove the latest inflation uptick. The MPC said further policy normalisation would depend on prevailing monetary and financial conditions, including risks from geopolitical tensions and forecast El Niño conditions in the 2026/27 agricultural season.
Rate evolution
The Reserve Bank of Zimbabwe held the Bank policy rate at 35% from June 2025 through March 2026 before cutting it by 500 basis points to 30% in June 2026 and by a further 250 basis points to 27.5% in September, leaving the rate 750 basis points lower over the period. The prolonged hold sought to entrench price and exchange rate stability, anchor inflation expectations and allow tight monetary conditions to transmit, as monthly inflation remained low, annual inflation fell into single digits, foreign currency inflows and reserves strengthened, and growth stayed robust despite uncertainty over global growth, trade tensions and geopolitical conflict. By March 2026, risk framing had shifted toward the oil-price shock and possible second-round effects on expectations, prompting continued restraint even though the Reserve Bank viewed the shock as supply-side and expected inflation to remain in single digits.
In June, after inflation stayed below 5%, oil-price pass-through proved limited, expectations remained anchored, reserves rose and the exchange rate remained stable, the Committee cut the rate to support projected growth of 5% but called the move a realignment rather than easing. On 28 September, it lowered the rate again as annual inflation stood at 3.7%, expectations remained anchored, foreign currency reserves exceeded USD 2 billion and the exchange rate remained stable, citing the benign inflation environment and the need to support growth prospects. The Committee again described the reduction as a realignment rather than monetary easing and said the pace of policy normalisation would depend on monetary and financial conditions, including risks from climatic shocks, geopolitical tensions and forecast El Niño conditions during the 2026/27 agricultural season.