Online Reporter
Business Reporter
Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mushayavanhu has pushed back against calls to lower the policy rate, arguing that doing so prematurely could undo the hard-won gains achieved in stabilising inflation.
Presenting the 2026 Monetary Policy Statement this morning, Dr Mushayavanhu addressed what he described as a predictable question from stakeholders – why the central bank is maintaining a 35 percent policy rate when inflation has fallen from 4.1 percent in January to 3.8 percent in February.
“You might ask, if inflation was 4.1 percent in January and is 3.8 percent now, why are you also not lowering the policy rate?” The argument is very simple. First of all, we need to ensure that we have anchored inflation expectations.
Dr Mushayavanhu explained the central bank’s caution, warning against celebrating too early and abandoning prudent policies.
He pointed to the behaviour of major central banks in advanced economies, noting that Zimbabwe is not alone in maintaining elevated rates even as inflation subsides.
“If you look at what other central banks have done, we start with the European Central Bank. When the inflation line crossed the policy rate line, they did not immediately reduce the policy rate. There was a period of maintaining it in an effort to anchor inflation expectations. You see the same with the Bank of England.”
The Governor’s remarks signal that the Monetary Policy Committee is in no hurry to begin an easing cycle, preferring instead to ensure that inflationary pressures are fully extinguished before loosening monetary conditions.
The RBZ raised the policy rate from 20 percent to 35 percent in September 2024, a move that Dr Mushayavanhu credits to taming exchange rate pressures and reinforcing the ZiG’s stability.
With inflation now comfortably within the SADC benchmark range of 3 to 7 percent, the central bank appears determined to maintain its tight stance for the foreseeable future, prioritising the entrenchment of low inflation over short-term stimulus.
