British consultancy Oxford Economics predicts that the Bank of Mozambique will lower its benchmark interest rate again in November if inflation “remains moderate,” following the cut in September to 9.75%.
“We anticipate that, if inflation continues to remain moderate—below the 5% target—the Monetary Policy Committee of the Bank of Mozambique could proceed with another 0.5 percentage point cut at the end of November,” the analysts wrote, as cited by Lusa.
The benchmark interest rate is the rate used by the central bank to lend to commercial banks, usually slightly below the rate at which banks lend to individual and corporate clients.
“With inflation at 4.8% in August, price growth remains below the central bank’s implicit 5% target. Although it has not defined an official inflation target, the bank aimed to keep inflation within the 2% to 8% range under its most recent International Monetary Fund (IMF) program, which ended in April,” the analysts explained.
In September, the Bank of Mozambique reduced its Monetary Policy Rate (MIMO) by 0.50 percentage points, setting it at 9.75%. This was the tenth consecutive cut since January 2024, amounting to a total reduction of 700 basis points.
The announcement was made by the bank’s governor, Rogério Zandamela, at the end of the Monetary Policy Committee meeting in Maputo, emphasizing that the decision was based on maintaining single-digit inflation expectations in the medium term.
“This measure essentially reflects the continued outlook for single-digit inflation, partly supported by the stability of the exchange rate and the favorable trend in international commodity prices, despite ongoing domestic risks and uncertainties,” he said.
The governor noted that the interest rate normalization process, initiated in 2024, met its initial 24- to 36-month timeline, benefiting households, companies, and the state itself.
“It has been a major gain for the system,” Zandamela stated, while acknowledging that commercial banks’ lending rates did not fully follow the downward trend, dropping by about 600 basis points over the same period.
However, Zandamela cautioned that future adjustments will be more conservative. “The Monetary Policy Committee (CPMO) will continue the normalization process for the MIMO rate over the medium term, but at increasingly modest magnitudes. The pace and size of future cuts will depend on inflation prospects as well as the assessment of medium-term risks and uncertainties,” he concluded.
Source: Diário Económico
