Rabat – Morocco’s central bank, Bank Al-Maghrib (BAM), could announce a new hike in the central bank’s interest rates as inflation continues to break records.
Central bank interest rates denote the rates that the central banks use to issue loans to conventional banks. Higher interest rates translate into more expensive loans for consumers, which in turn discourages consumers from taking loans, leading to a lower purchasing power. Central banks increase interest rates as a default measure to bring down inflation and keep prices stable.
As BAM expects inflation to average 6.2% at the end of 2022, the Moroccan central bank already hiked interest rates in September for the first time in over 14 years, raising its interest rates from 1.5% to 2%.
But raising interest rates does not have an immediate effect, as experts speculate that the measure can take up to two years to show any tangible results.
Morocco’s central bank is set to hold its quarterly meeting on December 20.
As inflation is showing no signs of slowing down amid inauspicious developments worldwide, experts predict that central banks around the world, including Morocco, are heading towards tightening monetary policies.
While rising interest rates could help control inflation, the measure could also result in slower economic activities. BAM had been previously reluctant to increase interest rates, arguing that the shocks the Moroccan market has felt of late are “external” and that inflation would weather down eventually.
The bank especially raised concern about Morocco’s stagnating real estate market, saying that higher interest rates would negatively affect the market. As economic activities slow down, meanwhile, unemployment will likely rise even higher – recent data suggests that unemployment is set at 11%.
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