Mozambique cuts rate another 150 bps as inflation falls

December 22, 2017

By CentralBankNews.info
      Mozambique’s central bank lowered its new monetary policy rate (MIMO) by another 150 basis points to 19.50 percent, citing the rapid decline in inflation and an improvement in short and medium-term inflation expectations.
       The Bank of Mozambique (BOM) has now cut its MIMO rate by 225 basis points since it was introduced in April at 21.75 percent, replacing the standing facility rate as its signal rate.
      Mozambique’s inflation rate fell to 7.15 percent in November from 8.35 percent in October for the ninth month in a row of falling inflation, and down from almost 27 percent in November 2016.
      By the end of this year BOM said it expects inflation to remain in single digits.
      Mozambique’s economy has been hit by several blows in recent years, leading to a sharp fall in the exchange rate of its metical currency in 2015 and 2016.
      On top of a decline in global commodity prices, including coal, the government hid almost US$1.4 billion of debt, the equivalent of 10 percent of its Gross Domestic Product. This led to foreign donors, including the International Monetary Fund, to withdrew funding to the country.
     The metical hit record lows of around 78.5 to the U.S. dollar in October 2016 but has slowly firmed since then, helped by central bank rate hikes and rising commodity prices.
     The stable exchange rate has helped curb inflation, and over the last month the metical has been rising. Today the metical was trading at 58.8 to the U.S. dollar today, up 21 percent this year.
      Mozambique’s economy grew by an annual rate of 2.9 percent in the third quarter of this year, slightly down from 3.1 percent in the second quarter.
       As of Dec. 20 Mozambique’s reserves had risen to US$3.167 billion – enough to cover 7 months of imports, excluding large projects – from US$2.514 billion in October.

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