The Monetary Policy Committee (CPMO) of the BoM (Bank of Mozambique) has decided to cut the monetary policy interest rate, also known as ‘MIMO’, from 12.75 per cent, in force since the end of November last year, to 12.25 per cent.
According to a statement released on Monday (27) by the BoM, ‘this decision stems from the maintenance of a single-digit inflation outlook in the medium term, despite the increased risks and uncertainties associated with the projections, particularly those arising from post-election tension, fiscal risk and climate shocks.’
The key interest rate had been set at 17.25 per cent since September 2022. After the central bank’s intervention, it began a series of consecutive cuts from 31 January 2024, when it was reduced to 16.5%. On 27 March, the BoM cut it to 15.75%, on 27 May to 15%, on 31 July to 14.25%, on 30 September to 13.5% and on 27 November to 12.75%.
In addition, the note states that the CPMO decided to reduce the compulsory reserve coefficients for liabilities in national currency from 39.0 per cent to 29.0 per cent and in foreign currency from 39.50 per cent to 29.50 per cent, with the aim of providing more liquidity to support the economy in restoring productive capacity and the supply of goods and services.
Rogério Zandamela, governor of the Bank of Mozambique
In the document, the financial organisation clarified that the outlook for inflation remains in the single digits in the medium term, recalling that in December 2024 ‘annual inflation rose to 4.15%, after 2.84% in November’, reflecting ‘the reduction in the supply of goods and services resulting from the post-election tension’.
‘Underlying inflation, which excludes fruit and vegetables and goods with administered prices, also increased. The maintenance of a single-digit inflation outlook in the medium term essentially reflects the stability of the metical and the impact of the measures taken by the CPMO,’ he said.
However, the statement signed by the governor of the Bank of Mozambique, Rogério Zandamela, warns that ‘the risks and uncertainties associated with inflation projections have increased’.
‘Factors that could increase inflation in the medium term include the impact of post-election tension, climate shocks and increased pressure on public spending, in a context of reduced financing capacity,’ he said.
The CPMO assured that it will continue with the process of normalising the MIMO rate in the medium term, stressing that ‘the pace and magnitude will continue to depend on the inflation outlook, as well as the assessment of the risks and uncertainties underlying the medium-term projections,’ it concluded.
