“We expect inflation to continue to rise, to 12.4% in the fourth quarter of this year year year-on-year, which could possibly trigger a further increase in the monetary policy interest rate (MIMO rate) of 50 basis points at the next monetary policy meeting on November 30,” the analysts write.
In a commentary on the latest rise in Mozambique’s benchmark interest rate, sent to investors and to which Lusa had access, Oxford Economics Africa said that “the latest decision of the monetary policy committee suggests that they expect inflation to remain at double digits in the coming months,” in line with the consultant’s forecast, which predicts a rise in prices of over 12 percent this year.
On Friday, the Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to increase the MIMO rate by two percentage points, from 15.25% to 17.25%, arguing with inflation and the international context.
“The measure aims to ensure the return of inflation to single digits in the medium term,” the regulator said in a statement, adding: “The volatility of energy and food prices at international level is expected to continue, in view of the prolonged conflict between Russia and Ukraine, with the potential to trigger a spiral of sustained price increases domestically.
Mozambique’s international reserves have “fallen consistently, from US$3.56 billion in July 2021 to US$2.83 billion in July of this year, with the central bank intervening in the foreign exchange market to stabilize the metical exchange rate at 63.83 per dollar,” say the analysts, warning that “a continued fall in real interest rates could lead to capital outflows, which would put further pressure on international reserves and undermine the central bank’s ability to maintain the exchange rate.
Year-on-year inflation in Mozambique was 12.1% in August, the highest in four years and 11 months, the National Statistics Institute (INE) announced.
