Morocco’s central bank keeps interest rate at 2.25%

RABAT (Capital Markets in Africa) – Morocco’s central bank maintained its key monetary policy rate at 2.25 percent and raised its forecast for inflation and growth slightly this year due to improved domestic demand and a rise in imported inflation.   

The Bank Al-Maghrib (BAM), which cut its rate by 25 basis points a year ago in response to declining inflation, added monetary conditions tightened slightly last year due to an appreciation of the real effective exchange rate of the dirham but this should moderate from a smaller increase in the nominal exchange rate compared with trading partners.     

The pace of bank lending accelerated to growth of 3.9 percent last year from 0.3 percent in 2015 and should improve to 4.5 percent this year and 5.0 percent in 2018, the central bank said.

Morococo’s inflation rate rose to 2.1 percent in January as fuel and lubricant prices rose but in the medium term inflation is expected to remain moderate and average 1.1 percent this year before rising to 1.7 percent in 2018 as underlying inflation inflation rises to 1.5 percent and 1.9 percent, respectively. In its previous policy statement from December 2016, the central bank forecast 1.0 percent inflation for 2017 and 1.5 percent in 2018.

Economic growth in Morocco declined to an estimated 1.1 percent last year form 4.5 percent in 2015 due to a 10 percent contraction in agriculture value added from the worst drought in decades. But based on better weather conditions and an improvement in foreign demand, the central bank expects growth to rise to 4.3 percent this year as agriculture value added expands by 11.5 percent and non-agricultural Gross Domestic Product grows by 3.4 percent.