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AfricaMoney | June 29, 2017

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Mauritius central bank holds key repo rate at 4.65% citing inflation under control

Mauritius central bank holds key repo rate at 4.65% citing inflation under control

Looking ahead, domestic economic activity is projected to strengthen further, supported by recent budgetary measures and their positive impact on investment and business confidence, with the BoM projecting a real GDP growth of 4.3 per cent for 2015. (Image: ION News)

The central bank of Mauritius has kept the key repo rate unchanged at 4.65% upon the convening of the Monetary Policy Committee (MPC) yesterday on Monday 6 April 2015, and has also forecast inflation rate for 2015 to hover around 3%.

The new governor of the Bank of Mauritius (BoM), Ramesh Basant Roi, held the first MPC meeting for the year 2015 on Monday, 06 April 2015, and a decision was taken to keep the repo rate unchanged at 4.65% given there is no threat of the inflation rate rising in 2015.

A press conference was held as well after the MPC meeting yesterday, highlighting the elements that favoured the steady repo rate of 4.65% with Ramesh Basant Roi saying that the price of oil is trending downward and the exchange rate of the dollar is stabilising, thus forecasted inflation rate for 2015 will remain stable at 3%. These are the main elements which led the MPC towards the final decision of keeping the repo rate unchanged.

On inflation, the MPC went on to note that headline inflation maintained its downtrend amidst subsiding food and energy inflation, declining steadily to 2.5 per cent in February 2015. Year-on-year inflation declined to a low of 0.2 per cent in December 2014 before rising to 2.0 per cent in February 2015 on account of higher prices of fresh vegetables following adverse climatic conditions in the first two months of 2015.

The BoM also aims to absorb the excess liquidity of Rs 17 billion in circulation and targets to capture Rs 17 to 20 billion rupees in circulation that will stabilise interest rate, stressed the central bank governor.

On global developments, the MPC noted that the global economy continues to grow at a moderate pace. While economic recovery has been consolidating in the United States, the prospects for growth in some developed economies – particularly the Eurozone and Japan – and in several emerging economies remain fragile. The IMF’s January 2015 WEO Update forecast global GDP growth at 3.5 per cent in 2015 and 3.7 per cent in 2016.

Members also took note of a broad-based appreciation of the US dollar on the international foreign exchange market due to, amongst others, expectations of a rise in the US Federal Funds rate later in 2015 and further monetary stimulus in other economies, namely the Eurozone and Japan. Global inflation remained low and several economies are even confronted with deflationary pressures.

Looking ahead, domestic economic activity is projected to strengthen further, supported by recent budgetary measures and their positive impact on investment and business confidence, basis which the BoM projected a real GDP growth of 4.3 per cent for 2015.

Ramesh Basant Roi considers a 4.3% growth rate for 2015 to be within reach. However, he concluded on the positive note that if key economic projects are realised in a shorter time frame he would not be amazed if the Gross Domestic Product of Mauritius were to even grow by a robust 5%. It was noted that the economy grew 3.7% in Q42014.

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