Africa Banking Currency Economy Finance Inflation Mozambique

Mozambique maintains 12.75% interest rate

The central bank of Mozambique decided on Thursday to maintain the reference rate at 12.75%, because of the single-digit forecast projection, but it was still concerned about factors that may influence prices.

“The Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to maintain the monetary policy interest rate, MIMO rate, at 12.75%; despite the increased risks and uncertainties for the short to medium-term horizon, the decision is supported by the fact that the projections continue to indicate single-digit inflation,” according to a communiqué distributed on Thursday in Maputo.

In the text about the decision, the central bank stated that given its assessment of the future, the CPMO’s concern about the evolution of the risks and uncertainties underlying the inflation projections increases.

Thus, the CPMO will continue to monitor economic and financial indicators and risk factors, as well as their impact on inflation prospects, and may take necessary corrective measures before its next regular meeting, scheduled for 30 April 2020, it said.

The inflation outlook for the medium term has been revised upwards, yet remains in the one-digit band, said the communiqué, which does not provide figures for these forecasts.

The increase in inflation stems fundamentally from the upward adjustment of the impact of climate shocks on future price dynamics, combined with the prospects of depreciation of the Metical in the short term and the upward trend of food prices in the international market.

At today’s meeting, the bankers decided to maintain the Deposit Facility and the Sending Facility rates at 9.75% and 15.75%, respectively and decided to maintain the Mandatory Reserves coefficients for liabilities in local and foreign currency at 13% and 36%.

For the CPMO, according to the assessment made of the recent macroeconomic environment, the risks and uncertainties associated with the projections have worsened.

At the domestic level, the intensification of military instability in the northern part of the country is highlighted, in addition to the uncertainties regarding the extension and impact of the floods and droughts that have devastated the country, and externally, the recent outbreak of the Covid-19 epidemic, which, if extended, could result in the slowdown of the global economy and the consequent weak external demand, with an impact on the dynamics of domestic prices.

Source: Lusa via Club of Mozambique

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