Banking Economy Finance Government Inflation Mozambique

Bank of Mozambique cuts benchmark interest rate to 10.25%

The Monetary Policy Committee of the Bank of Mozambique (CPMO) cut the monetary policy interest rate (MIMO rate) by 100 basis points to 10.25%.

“The decision was supported by a further downward revision of the inflation outlook for the medium term, in a scenario where tighter aggregate demand is expected in 2020 and a soft recovery in 2021,” the central bank announced in a statement.

The scenario reflects “the restrictions on economic activity associated with the challenges imposed by Covid-19 both domestically and internationally”.

The CPMO decided to further reduce the rates on the Standing Deposit Facility (FPD) and the Standing Lending Facility (FPC) by 100 basis points to 7.25% and 13.25% respectively.

In addition, “the body decided to lift the restrictions on access to the FPC window introduced in October 2016”.

Also read: Mozambique business calls for cut in interest rates

The compulsory reserve (RO) coefficients for liabilities in national and foreign currency remained at 11.50% and 34.50%, respectively.

The decisions were taken at the meeting at which the central bank concluded that the country’s near-future economic prospects were increasingly uncertain because of the Covid-19 pandemic and the military conflict in Cabo Delgado, in the north of the country.

“Internally, the restrictions imposed in the context of the prevention of Covid-19 and the military instability, especially in the northern part of the country, could severely affect economic performance in 2020, in a context in which external demand for national products is increasing lower,” the central bank says.

The next regular CPMO meeting is scheduled for August 20.

Source: Lusa via Club of Mozambique

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