Morocco central bank cuts key interest rate as inflation drops

Morocco’s central bank cut its borrowing rate to 2.75% from 3% as inflation drops thanks to lowering food prices and easing external inflationary pressures, the bank said following its board meeting.

“On the basis of all these considerations, the Board considered that the calibrated tightening of monetary policy, the regular monitoring of the transmission of its decisions, as well as the measures introduced by the Government to support the purchasing power of households and some economic activities have resulted in very significant progress in easing inflation … in line with the price stability goal,” the central bank said in a statement.

“Under these conditions, and after keeping the key rate unchanged for four consecutive meetings, it decided to reduce it by 25 basis points to 2.75%,” it said.

Inflation is expected to drop to 1.5% in 2024, compared with 6.1% in 2023 and 6.6% in 2022, it said.

Consecutive droughts have slashed Morocco’s cereals output weighing on overall economic growth, which the bank sees dropping to 2.8% this year, after 3.4% last year. The bank expects the country’s economic growth to rebound to 4.5 % in 2025.

Despite an increase in car and phosphates based products, the current account deficit is expected to expand to 1.7% this year.

Morocco’s foreign exchange reserves are seen at 38 billion dollars, enough to cover 5 months and a half of imports.