THE Reserve Bank of Zimbabwe (RBZ) will adjust the policy rate when convinced that price stability gains are durable, Deputy Governor Dr Innocent Matshe has said, urging patience from businesses eager for an immediate rate cut.
His remarks come after Zimbabwe recorded domestic currency single-digit annual inflation for the first time in 29 years, a milestone widely viewed as a key anchor for durable macro-economic stability and a foundation for sustainable growth.
Zimbabwe introduced the foreign currency reserves and gold-backed domestic unit, ZiG, in April 2024, which, along with tight monetary policy and prudent public finance management, kept inflation in check.
A policy rate, also known as the bank policy rate, is the interest rate set by a central bank to guide the cost of money (banks’ interest rate framework) in the economy.
When the policy rate is high, borrowing becomes more expensive, which slows spending and contains inflation.
When it is lowered, credit becomes cheaper, encouraging investment and economic activity. As such, the policy rate is one of the most powerful tools used by central banks to manage inflation, stabilise the currency and steer overall economic conditions.
The Reserve Bank of Zimbabwe
Speaking during a state of the economy and outlook engagement in Bulawayo, Dr Matshe said while the inflation breakthrough is significant, the central bank relies on consistent data trends rather than a single positive reading before signalling any change in the bank policy rate. He said the bank will take a cautious approach built on experiences from other global reserve banks.
“Now, the question would be, we have just entered single-digit inflation. The question is, should we start adjusting the bank policy rate now? I know that is where companies want to go immediately.
“So, let me assure you that the bank will, in time, you know, give the signals of when it thinks it is prudent to do so because you do not immediately adjust because you have attained that,” he said.
He stressed that policy decisions must be guided by sustained evidence to avoid creating uncertainty in the market.
“It has to be durable enough. So you need more than one data point to respond.
“Because what you do not want is to react immediately and you reverse when things do not go well. That is dangerous because now you’re confusing business.”
Dr Matshe said the current single-digit inflation environment plays a crucial role in maintaining positive real interest rates, a key pillar of financial sector confidence.
He noted that positive real rates are essential for value preservation, investment growth and overall financial stability, as they protect savings and support long-term capital formation.
Zimbabwe has registered a historic economic milestone, with annual inflation falling into single digits for the first time since 1997, effectively ending 29 years of persistent price instability and marking a major turning point in the country’s macroeconomic reform journey.
zig
Official figures for January 2026 show year-on-year ZiG inflation plunging to just 4,1 percent, from 15 percent in December 2025.
The dramatic deceleration reflects the impact of sustained monetary tightening, improved fiscal discipline and growing confidence in the gold-backed Zimbabwe Gold (ZiG) currency.
The improved outlook has been underpinned by ZiG, which has played a central role in anchoring exchange rate stability, curbing speculative behaviour and strengthening the monetary policy framework.
On a month-on-month basis, ZiG inflation stood at zero percent in January 2026, easing from 0,2 percent the previous month, meaning average prices in local currency remained unchanged.
The rare price stability signals strengthening control over money supply growth and more effective co-ordination between fiscal authorities and the central bank.
Fiscal restraint saw the Treasury abandon the previous habit of turning to the central bank financing window to fund public expenditure deficits, a previous source of money supply growth and driver of inflation.
The stability underscores growing discipline in liquidity management, improved synchronisation of fiscal and monetary policy and rising public confidence in the domestic currency, key pillars in maintaining economic stability.
Economist Professor Gift Mugano weighed in, backing the central bank’s cautious approach and pointing out that policy consistency is more important than short-term sentiment.
Professor Mugano said, “In our view, we think the policy rate will remain unchanged throughout 2026.
There is a need to entrench stability; it has to be staggered. It is not about how you feel, but it takes time.”
Dr Matshe added that the central bank’s emphasis on durability and predictability is expected to strengthen confidence among investors, lenders and corporates, as authorities seek to consolidate stability, preserve the value of the local currency and sustain Zimbabwe’s broader economic recovery trajectory.
“The Reserve Bank remains vigilant and responsive, calibrating its monetary policy stance to balance price stability and economic growth imperatives.
“The Reserve Bank will continue to pursue a prudent, data-driven monetary policy stance supported by effective communication through regular updates to foster certainty and predictability.
“Overall, the Reserve Bank will aim to entrench macroeconomic stability in the short to medium term, critical to achieve the conditions precedent for the roadmap to mono-currency and attain the NDS 2 targets and objectives toward the realisation of a Prosperous and Empowered and Upper Middle-Income Society by 2030.”
He added that authorities will not rush to adopt a mono-currency system unless key economic fundamentals are firmly in place, stressing that moving prematurely would be counterproductive.
His remarks come amid growing debate on the country’s currency roadmap, with the central bank maintaining that macroeconomic stability and adequate reserves are non-negotiable pillars before any transition.
Dr Matshe said the market will determine movement as it is a process, stressing that no business should fear movement to a mono-currency.
“If these conditions are not fulfilled, it would be futile for us to move to mono-currency. So we are not, as a Reserve Bank, going to encourage any movement, date or no date, movement into mono-currency if these conditions do not work,” said Dr Matshe.
Dr Matshe outlined a several-pronged framework that must guide any consideration of a mono-currency regime, beginning with sustained macroeconomic stability.
“The first is that we have to have durable macroeconomic stability, which is characterised by low, stable growth, enhancing single-digit inflation.”
He said the second condition relates to the strength of the country’s foreign currency buffers.
“The second is adequate foreign currency reserves of at least three to six months of import cover in the medium to long term. And what is that? You may ask, given that we are now at one-and-a-half months.
And we have achieved that in less than 18 months.”
The Deputy Governor said the third pillar focuses on the efficiency and structure of the foreign exchange system.
“The third condition is an efficient foreign currency management system that eliminates foreign exchange market segmentation and promotes the use and access to foreign currency.”
In a strong assurance to the market, Dr Matshe said Zimbabwe at present has sufficient foreign currency to meet legitimate national needs.
“I can confirm right here and now that this country has enough foreign currency for all our important needs.
“Those requirements include school fees payments, medical expenses if you have complications that need intervention from specialists abroad. Also, another need is that of investment if you are within the benchmarks that exchange control allows.
“So, anything legitimate you will get foreign currency for it. That’s the message from the central bank and banks.”
His comments are expected to bring clarity and reassurance to economic players, as the central bank continues to prioritise stability, confidence and orderly reforms in the monetary system.-herald
