Low levels of inflation in Morocco. How will the central bank react?

The central bank of Morocco is expected to keep the benchmark interest rate at one level record, as subdued inflation gives policymakers space to focus on the country’s king-set priority of reviving the COVID-19-stricken economy.

Tuesday’s interest rate decision comes 10 days before King Mohammed VI’s highly anticipated speech to the newly elected parliament, in economic growth is expected to bring in top of the national agenda.

The North African country has resisted the worst economic fallout of the pandemic, launching one of the continent’s most advanced vaccination campaigns and providing incentives to businesses and families most in need.

The resumption of exports and tourism during the summer has replenished foreign exchange reserves while the harvest record last month’s grain crop helped contain the impact of the global rise in commodity prices prime.

Annual inflation in Morocco fell to 0.8% in August, the lowest level in five months, and well below the central bank’s 2% target. This allows Bank Al-Maghrib to keep the benchmark interest rate at its all-time low at 1.5%, from the combined 75 basis point reduction in March and June last year.

African central banks witnessed the setting of interest rates amid concerns about GDP growth, and a survey of 35 influential investors in the Moroccan stock market showed that 95% of respondents expect the central bank to extend the fixing period. interest for the fifth consecutive quarterly meeting. The business investigation was conducted by Global Research, a unit of Attijariwafa Bank, Morocco’s largest bank.

“The Moroccan context appears to contain a buffer zone,” the business newspaper L’Economiste said in an editorial on Monday, citing underlying inflation which has been relatively subdued and will allow the central bank to re-fix interest.

He added that the focus would instead be on whether the new government, which will be unveiled soon after this month’s parliamentary elections, will maintain the stimulus programs introduced during the pandemic.

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