The Bank of Zambia lowered its policy rate to 10.25% from 11% and slashed the statutory reserve ratio to 8% from 9.5%.
The central bank said its monetary policy decision was guided by the continued decline in inflation, and expectations that it will remain well within the medium-term target range of 6% to 8% over the next eight quarters.
In cutting its policy rate, the central bank also considered the prevailing high lending rates among commercial banks, subdued economic growth and risks to the financial sector's stability.
Annual overall inflation fell to 6.6% at the end of the third quarter, down from 6.8% in the second quarter.
The bank expects the Zambian economy to grow 4.2% and 5% in 2017 and 2018, respectively, up from a 3.8% growth in 2016.
