The central bank of the island of Mauritius lowered its key repo rate by 15 basis points to 3.35 percent, saying easing price pressures “provides room for a reduction in the policy rate as a pre-emptive move against the risks associated with weakening global growth.”
It is the first rate cut by the Bank of Mauritius (BOM) since September 2017 and a majority of its monetary policy committee voted for the cut.
Although BOM said the underlying growth momentum in the Indian Ocean island remains positive, as a small, open economy Mauritius has to “further enhance its resilience to be able to withstand the worsening external environment.”
The gross domestic product of Mauritius slowed to year-year 3.3 percent growth in the first quarter of this year from 4.1 percent in the previous quarter, but BOM still maintained its forecast for full year growth of 3.9 percent and 4.0 percent for 2020.
But inflation remains low and BOM said headline inflation fell further to 0.9 percent in July from 1.2 percent in April and again lowered its forecast for 2019 average inflation of 0.5 percent from May’s forecast of 1.5 percent and the February forecast of 2.1 percent.
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In April the International Monetary Fund forecast 2019 inflation of 2.1 percent, down from 3.2 percent in 2018 and 2020 inflation of 3.9 percent.
Today, BOM forecast average 2020 inflation of 1.5 percent.
The exchange rate of the Mauritian rupee has risen this month after depreciating steadily since February and was trading at 35.67 to the U.S. dollar today, down 3.4 percent this year.
The Bank of Mauritius issued the following statement:
