Rabat – Morocco’s central bank, Bank Al-Maghrib (BAM), announced on Tuesday its decision to maintain its key interest rate at 2.75%. The bank made the decision today during its third quarterly meeting of 2024.
“The Council deemed it appropriate to maintain the current orientation of monetary policy. It thus decided to keep the key interest rate unchanged at 2.75%, while continuing to closely monitor developments of the economic and social situation,” BAM said in a statement.
It noted that inflation has remained moderate this year, primarily due to declining prices of volatile food products and a slowdown in core inflation. After hitting 5.6% in 2023, core inflation is projected to stabilize around 2% for the next eight quarters. The overall inflation rate is expected to decline from 6.1% in 2023 to 1.3% by the end of 2024, before rising to 2.5% in 2025.
BAM highlighted a notable improvement in inflation expectations, as indicated by its quarterly survey of financial sector experts. Expectations for the next eight quarters are pegged at 2.2%, with a slightly higher estimate of 2.3% for the 12-quarter horizon.
Ahead of BAM’s announcement, investors had anticipated a potential reduction in the key interest rate. A recent survey by Attijari Global Research indicated that 83% of surveyed investors expected a 25 basis point cut, reflecting a broader consensus on the need for a supportive monetary policy amidst ongoing economic challenges.
While some analysts, such as BMCE Capital Global Research, predicted that BAM will maintain the status quo, others emphasized the importance of responding to both domestic pressures and international monetary trends, particularly as central banks globally adopt more accommodative stances.
Read also: Morocco’s Inflation Remains Under Control Despite Economic Challenges
In terms of economic growth, BAM’s latest report anticipates a slowdown to 2.8% in 2024, following a growth rate of 3.4% in 2023. This decline is attributed to a projected contraction of 6.9% in agricultural value-added for 2024, with expectations of an 8.6% rebound in 2025, contingent on average cereal production of 55 million quintals. Non-agricultural growth, however, is expected to improve, rising from 3.6% in 2023 to 3.9% in both 2024 and 2025.
On the external accounts front, BAM AM forecasts a recovery in goods trade following a decline in 2023. Goods exports are projected to increase by 4.8% in 2024 and by 9.2% in 2025, driven mainly by the automotive sector and phosphate derivatives. Imports are also expected to rise, with a 5% increase in 2024 and a 9% jump in 2025.
Meanwhile, the Bank’s foreign reserves are expected to grow, reaching MAD 384.3 billion by the end of 2024, providing roughly 5.5 months of import coverage. The liquidity needs of banks are projected to widen significantly, escalating from MAD 111.4 billion at the end of 2023 to 146.6 billion by 2025.
