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Mozambique: Fitch Solutions forecasts interest rate decline to 12.25%

Consultancy firm Fitch Solutions said yesterday that it expects the central bank of Mozambique to lower the central interest rate by 1 percentage point in the second half, ending the year at 12.25%.

“The stable inflation outlook, in a context of a weaker exchange rate and with little pressure from demand, will make room for a more aggressive outlook in the coming quarters, particularly when economic activity will remain weak,” said the analysts.
“We anticipate that the Bank of Mozambique will lower its benchmark interest rate by 100 basis points, to 12.25% in the second half of this year, after maintaining the rate at last week’s meeting,” say the analysts, pointing out that they also expect the banking regulator to “keep the interest rate at 12.25% in 2022, in a context of strengthening economic growth and controlling inflation”.

Bank of Mozambique’s Monetary Policy Committee (CPMO) decided last Wednesday to keep the monetary policy interest rate (MIMO rate) at 13.25%, the Mozambican financial regulator announced in a statement.

“The decision is based on the worsening of risks and uncertainties, despite the downward revision of inflation prospects in the short and medium term, reflecting, above all, the recent appreciation of the metical”, a press release notes.

Also read: Mozambique’s economic growth seen at 1.5% in 2021

The CPMO also decided to keep the interest rates on the Standing Deposit Facility (FPD) at 10.25% and on the Standing Lending Facility (FPC) at 16.25%.

The CPMO carried out a downward revision of inflation, decelerating to 5.19% in April, after 5.76% in March, as a result of the recent appreciation of the metical and the dissipation of the impact of the storms that plagued the country at the beginning of the year.

A slower recovery of the economy is expected in 2021, sustained by weak domestic demand, coupled with the suspension of the gas exploration project by Total, despite the forecast of a gradual recovery in external demand and the tendency to contain the spread of Covid-19.

Source: Further Africa

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