Bank of Mozambique increases interest rate to 17.25% – AIM report

Login

Register

http://www.clubofmozambique.com/

Bank of Mozambique increases interest rate to 17.25% – AIM report

11:39 CAT | 03 Oct 2022

in file CoM

The Bank of Mozambique on Friday increased its benchmark interest rate by 200 base points from 15.25 to 17.25 per cent.

According to a statement issued by the bank’s Monetary Policy Committee (CPMO) and signed by the governor of the Central Bank, ‘the decision aims to ensure the return to single digit inflation in the medium term”.

The Central Bank explains that it comes in a context where volatility of both energy and food prices at the international market which are expected to continue, fuelled by Russia and Ukraine conflict, which has the potential to trigger a spiral of sustained price increases at the domestic level.

READ: Just in: Bank of Mozambique raises MIMO rate from 15.25% to 17.25% – Watch

“Inflation outlook points to a continued increase in the short term and a deceleration in the medium term”, reads the Central Bank statement.

In August, annual inflation accelerated to 12.1% after 11.8% in July, shown by the increase of prices of administered goods, especially urban transportation, although underlying inflation remained stable.

For the medium term, a return to single-digit inflation is foreseen, reflecting the effects of the increases in the MIMO rate and the continued stability of the Metical, in a context of uncertainties regarding the behaviour of energy and food prices in the international market.

The Bank warns that the risks and uncertainties associated with inflation projections remain high. On a domestic level, for instance, uncertainties prevail regarding adjustment of prices of administered goods and their impact on prices of other goods and services.

Externally, uncertainties remain about the magnitude and persistence of the effects of the conflict between Russia and Ukraine.

On the positive note, the Central Bank sates that forecasts for economic recovery in 2022 and 2023 is maintained, despite the prospects of slowing external demand.

“These forecasts are supported by the implementation of energy projects in Inhambane and in the Rovuma basin and by the beginning of liquefied gas exports, in a context of the implementation of the program with the International Monetary Fund and the resumption of foreign aid from cooperation partners”, explains the document.

Domestic public debt, excluding loan and lease agreements and overdue liabilities, stands at 263.1 billion meticais (about 4.1 billion US dollars at current exchange rates), an increase of 44.3 billion compared to December 2021.

In the meantime the Bank will continue to monitor the evolution of risks and uncertainties associated with inflation projections, and will not hesitate to take the necessary corrective measures.

Source: AIM