RBZ holds key rate at 35%

…as it seeks to entrench inflation fight

Stephen Chifamba

HARARE – THE Reserve Bank of Zimbabwe (RBZ) held its benchmark interest rate steady, signalling a commitment to crushing persistent inflation despite a dramatic recent slowdown in price growth, as the nation eyes a historic shift to a single currency by 2030.

The Monetary Policy Committee (MPC) left the Bank Policy Rate unchanged at 35%, RBZ governor John Mushayavanhu announced following the committee’s final meeting of the year. The statutory reserve requirements were also held at 15% for savings and time deposits and 30% for demand deposits.

The decision underscores a “stay the course” mantra from the central bank, which has maintained a tight policy stance since late 2024. It comes as annual inflation denominated in the local ZiG currency has plummeted from 82.7% in September to 19.0% in November, a decline the governor attributed directly to monetary discipline.

“The maintenance of a prudent monetary policy stance since September 2024 has been critical in supporting the disinflation process and general macroeconomic stability,” Mushayavanhu stated in the MPC communiqué.

He projected that annual inflation would close 2025 in a band of 15-17%, significantly lower than earlier forecasts, and, in a milestone for the long-troubled economy, touch single digits in the first quarter of 2026.

This would mark the first time local currency inflation has fallen below 10% in over two decades.

Despite the encouraging data, the MPC emphasized that the battle is not yet won. The resolution to hold rates firm is “underpinned by the need to sustain and entrench the prevailing price, currency and exchange rate stability, to allow the effect of the current monetary policy stance to transmit to the real economy sufficiently and to sustainably anchor inflation expectations,” the governor said.

Mushayavanhu reaffirmed the bank’s strong commitment to a well-calibrated and data-driven monetary policy stance to sustain the current positive real interest rates environment. This environment, he argued, is essential for boosting demand for the ZiG, protecting savings, and deterring speculative borrowing.

Beyond the immediate inflation fight, the central bank’s actions are framed within a broader, ambitious structural agenda.

The MPC explicitly linked current stability to progress on the “Conditions Precedent” for transitioning to a monocurrency system by 2030, a goal outlined in the newly announced 2026 National Budget and the National Development Strategy 2 (NDS2).

A key fiscal measure supporting this transition was highlighted by the MPC: the government’s decision to cut the Intermediated Money Transfer Tax (IMTT) on ZiG transactions from 2% to 1.5%.

“This measure is critical to complement monetary policy measures aimed at promoting the wider use of the domestic currency and financial inclusion in support of the eventual transition to monocurrency,” Mushayavanhu noted. The tax cut is seen as a direct incentive to shift transaction volume into the local currency and away from the ubiquitous US dollar.

The launch of the NDS2 (2026-2030), which aims for an “Empowered and Prosperous Upper-Middle Income Society” by 2030, provides the overarching framework. The governor stated that macro-economic stability and financial sector deepening will be critical for its realization.

The RBZ expects that once a low-inflation environment is firmly entrenched, it will begin to gradually normalize interest rates to stimulate private sector credit and investment.

For now, however, the priority remains vigilance. The economy, expected to grow 6.6% this year on robust mining and agriculture, is being given a stable monetary platform, with the central bank betting that today’s restraint is the foundation for tomorrow’s growth and a transformative currency overhaul.