Economics Association of Zambia welcomes 250bps MPR cut; warns of oil price and El Niño risks

# What happened

# How the Economics Association of Zambia responded Zambia (EAZ) publicly welcomed the central bank's move. EAZ National Secretary Dr John Musantu said the reduction should lower borrowing costs for businesses and consumers by reducing the cost of funds in the banking system.

EAZ also identified the main risks that could undermine the benefits of the rate cut: rising oil prices and the projected El Niño conditions for 2026/27. The association warned these factors could push up inflation, put pressure on the exchange rate, and challenge financial stability, which in turn could blunt the transmission of the MPR cut to lending rates.

# Context worth knowing

• The policy rate cut was announced mid-week and represents a significant easing of monetary policy.

# What the cut is intended to do

# Risks and transmission concerns EAZ spelled out two concrete risks:

• Oil prices: A rise in fuel costs would push up domestic inflation directly through higher transport and production costs, which can erode real income and increase costs across the economy.
• El Niño 2026/27: Adverse weather linked to El Niño can disrupt agriculture, reduce crop yields, and strain food supply—another direct inflationary channel that can weaken the effectiveness of a policy-rate cut.

# What this means for borrowers and markets If banks pass the rate cut on, borrowing costs should fall for consumers and businesses, making loans cheaper and potentially supporting credit growth. However, the EAZ warning indicates that the cut's benefits depend on external developments—especially oil prices and weather—and on banks' willingness to lower lending rates in the face of any renewed inflation or currency stress.

# Who reported and where to find the original reporting The report is by Sherry Chabala for Diggers News. The full item on the site requires membership to read the complete article.

# Bottom line The MPR cut signals monetary easing and the potential for cheaper credit, but the Economics Association of Zambia highlights tangible risks—rising oil prices and the projected El Niño—that could limit the cut's effectiveness in reducing borrowing costs and preserving financial stability.