Mozambique Interest Rate

The Central Bank of Mozambique left its benchmark MIMO interest rate unchanged at 12.75 percent during its October meeting, after a 50 bps cut in the previous session, saying that military instability in the central and northern areas of the country, climate shocks and global trade tensions pose serious risks to the inflation outlook. Still, policymakers noted that current projections point to a low inflation in the medium-term, supported by currency stability, while the economy is seen recovering from 2020 but to remain below its potential.

The Central Bank of Mozambique lowered its benchmark MIMO interest rate by 50bps to 12.75 percent during its August meeting, saying medium-term inflation expectations continue to improve while economic activity is seen weaker this year. On a more positive note, policymakers believe that the recent Peace and National Reconciliation Agreement signed by President Filipe Nyusi and Renamo leader Ossufo Momade at the beginning of the month would boost investment and activity.

The Central Bank of Mozambique lowered its benchmark MIMO interest rate by 100 bps to 13.25 percent on June 19th 2019. It is the first rate cut so far this year, bringing borrowing cost to the lowest since 2016. The Committee said that the decision is based on the improvement of the inflation outlook due to the current trajectory and expectations of a lower exchange rate pressure in the domestic market and as the aggregate demand is still below its potential. Policymakers added that they will continue to monitor risks related with inflation. The lending facility rate and the deposit facility interest rate were also cut by 100 bps to 16.25 percent and 10.25 percent, respectively. The required reserve ratio for foreign and domestic currency were left unchanged at 14 percent and 36 percent, respectively.

The Central Bank of Mozambique left its benchmark MIMO interest rate steady at 14.25 percent on April 25th 2019, mentioning higher inflationary pressures amid the recent natural disasters and a weaker Metical. In March, annual inflation rate fell to 3.41 percent from 3.72 percent in February, the lowest level since May of 2018. The lending facility rate and the deposit facility interest rate were also kept unchanged at 17.25 percent and 11.25 percent, respectively. The required reserve ratio for foreign and domestic currency were held at 14 percent and 36 percent, respectively.

The Central Bank of Mozambique left its benchmark MIMO interest rate steady at 14.25 percent during a surprise meeting on March 6th 2019 but raised the required reserve ratio for foreign currency by 900 bps to 36 percent, mentioning increasing external risks and a more volatile USD. The required reserve ratio for domestic currency was kept at 17 percent and the lending facility and the deposit facility interest rate were also left steady at 17.25 percent and 11.25 percent, respectively.

The Central Bank of Mozambique left its benchmark MIMO interest rate unchanged at 14.25 percent on February 11th 2019, after trimming it by 75 bps in the previous meeting. Policymakers said that the decision is based on the short and medium-term projections which continue to indicate that the inflation rate will remain in a single digit by the end of the year as fuel prices are expected to slow. The Committee added that the economy is projected to expand in the last quarter of 2018 and in 2019 mostly driven by the domestic demand and also noted the risks linked to the sustainability of the public debt, natural disasters and the uncertainties regarding the evolution of administered prices. The lending facility rate and the deposit facility interest rate were also kept unchanged at 17.25 percent and 11.25 percent, respectively. The required reserve ratio for foreign and domestic currency were held at 14 percent and 17 percent.