Zimbabwe Cuts Rates First Globally After US-Iran Peace Deal

Zimbabwe central bank Governor John Mushayavanhu Photographer: Cynthia R Matonhodze/Bloomberg Photo by Cynthia R Matonhodze /Bloomberg

Article content

(Bloomberg) — Zimbabwe’s central bank became the first in the world to cut interest rates after the US and Iran said they reached an interim peace deal to reopen the Strait of Hormuz, an announcement that drove down oil prices.

Article content

The monetary policy committee lowered the benchmark interest rate to 30% from 35%, Governor John Mushayavanhu said in an emailed statement on Monday. 

Article content

Article content

Article content

The reduction is the first since the central bank reset the rate in April 2024 after introducing a new currency. The ZiG, short for Zimbabwe Gold, replaced the foundering Zimbabwean dollar and is the southern African’s nation’s sixth attempt at creating a functioning local currency since 2009. 

Article content

Article content

The cut does not mark the beginning of a monetary easing cycle at this stage “but a realignment of the policy rate to the structural shift in inflation dynamics,” Mushayavanhu said. The annual inflation rate has fallen from peak levels of 95.8% in July 2025 to sustained single digit levels below 5% this year, he said.

Article content

Inflation slowed to 4.4% in May from 4.8% a month earlier. Price pressures could ease further if the US-Iran deal enables oil and fertilizer flows to fully resume, which would help lower energy and food costs. The Strait of Hormuz handled about a fifth of global seaborne oil and liquefied natural gas shipments and a third of fertilizer exports before the war.

Article content

“The MPC expressed optimism that promising signals from the US-Iran peace deal, which precipitated a fall in Brent crude oil prices, would sustain the declining trend in prices, thereby supporting the country’s low inflation environment,” Mushayavanhu said in the statement. 

Article content

Brent crude prices fell 6% since the agreement was reached to about $82 a barrel.

Article content

“Despite the disruptions to global supply chain logistics due to the Middle East conflict, the domestic economy has remained resilient and is expected to grow by 5% in 2026, from the revised estimate of 8.2% in 2025,” Mushayavanhu said.

Article content

Sign up here for the daily Next Africa newsletter and subscribe to the Next Africa podcast on Apple, Spotify or anywhere you listen.

Article content

(Updates with comments from governor in fourth paragraph)

Article content