High Investor Confidence in Bank Al-Maghrib Holding Interest Rates Steady

Rabat – After one year of adopting the most aggressive monetary policy in its history to shore inflation, Morocco’s central bank Bank Al-Maghrib, is now expected to hold interest rates unchanged at 3%.

Morocco’s central bank is set to hold its quarterly meeting on Tuesday, December 19, during which its board will announce whether or not to raise benchmark interest rates.

A market survey from Attijari Global Research, a financial research center, shows that 96% of investors expect interest rates to hold steady, while 3% believe that interest rates might even drop by 25 basis points.

The survey included a sample of 35 investors considered among the most influential in the Moroccan financial market, according to Attijari Global Research.

Breaking down the results of the survey by investors’ segments, the research center maintains that 100% of foreign investors agree that interest rates will remain unchanged, compared to 99% of local investors.

Higher interest rates translate into more expensive loans, which in turn discourages investors and individuals from spending. Hiking interest rates is a textbook solution used by central banks around the world to tame inflation.

However, high interest rates result in slower economic activities as consumer spending takes a hit, resulting in high unemployment rates, and even slower economic growth.

The high investor confidence in interest rates remaining unchanged is likely due to the slowdown in inflation indicators in the country coupled with the country’s ongoing efforts to fund large-scale projects to reconstruct demolished zones in the wake of the September 8 earthquake.

Inflation has shown signs of slowing down in 2023, with the central bank expecting it would average 6% this year, down from 6.6% in 2022. BAM further expects inflation to weather to 2.6% in 2024, still above the 2% target.

Despite the prospects of recovery, inflation this year remained largely high due to the rise in food prices.

The central bank has already refrained from hiking interest rates in September of the last quarter. The decision was made less than a week after the country committed a colossal $11.7 billion budget to fund the reconstruction of earthquake-hit regions.