Mozambique: Fitch forecasts 10.25% interest rate throughout 2021

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Mozambique: Fitch forecasts 10.25% interest rate throughout 2021

8:29 CAT | 24 Aug 2020

File photo: DW

Fitch Solutions considered on Friday that the central bank of Mozambique should keep its key interest rate at 10.25% until next year, anticipating a gradual recovery of economic growth.

“We maintain our forecast that the Bank of Mozambique will maintain its interest rate at 10.25% during 2021,” reads a commentary on the decision to maintain the rate, taken on Thursday by the Monetary Policy Committee of the central bank.

In the comment, sent to clients and to which Lusa had access, the consultant held by the same owners of the financial rating agency Fitch Ratings writes that “economic production should have hit bottom in the second quarter of this year, and will gradually recover in the coming months, limiting the need for further cuts.

On Thursday, the central bank kept the interest rate at 10.25 percent, after two cuts in April and June, in the cumulative figure of 250 basis points.

“Despite the impact of Covid-19 on domestic demand, Governor Rogério Zandamela emphasized the growing risks to rising inflation, which arise from the depreciation of the metical and the gradual increase in oil prices,” write the analysts.

Experts note that after negative growth of 3.25% in the second quarter, the economy should recover and reach the end of the year at 0.2%, accelerating to 3.6% in 2021.

Inflation, analysts anticipate, should average 3.2% this year and 4.6% in 2021, up from 2.8% last year, well below the average of 7.8% recorded between 2010 and 2019.

Source: Lusa