Bank of Mozambique hikes Marginal Lending Facility rate by 50bps to 8.25% to curb inflation …

MAPUTO, Mozambique, Capital Markets in Africa — Mozambique’s central bank raised its benchmark standing facility rate by a further 50 basis points to 8.25 percent, citing the need for “redoubled caution” in light of the prospects for short and medium-term inflation at a time of growing foreign and domestic risks, according to stated issued by the Bank of Mozambique.  The bank has raised its rate by 75 basis points so far in 2015 following an initial hike in October 2015.

The bank also increased the interest rate on the bank’s deposit facility rate by 75 basis points to 2.75 percent and the reserve requirement was increased by a further 150 basis points to 10.50 percent with effective from 7^th December 2015.

The meeting also decided to intervene in the interbank market to ensure that the money supply will not exceed 66.4375 billion meticais at the end of November.

Mozambique’s inflation rate jumped to 4.74 percent in October from 2.73 percent in September, this increase is as result of depreciation in Mozambique’s  metical’s exchange rate against the US dollar.  The metical has been depreciating since October 2014 but its decline steepened in August (see the chart below), prompting the central bank to increase sales of foreign exchange.

Furthermore, the statement highlighted that the international economic climate, combined with the shock felt by the Mozambican economy has been reflected in moderate GDP growth and the deterioration of external sector indicators with an impact on the behaviour of the exchange rate and inflationary pressure.