Mozambique Cuts Key Rate as Inflation Lingers Near 2015 Low

(Bloomberg) -- Mozambique’s central bank reduced its benchmark lending rate for the sixth consecutive meeting as inflation lingered near a 2015 low and the regulator tries to spur an economy that’s forecast to expand at the slowest pace in 18 years.

The Monetary Policy Committee cut the benchmark interbank rate, known by its Portuguese acronym MIMO and introduced in April 2017, by 75 basis points to 15.75 percent, Banco de Mocambique Governor Rogerio Zandamela told reporters in Maputo, the capital. It held the permanent lending facility at 18 percent.

A stable inflation rate and projections that show it’s expected to stay in single digits in the medium term allowed the MPC to continue with its rate-reduction cycle that started in April 2017, Zandamela said.

Mozambique’s economy is struggling in the wake of a foreign debt crisis, even as higher prices for its biggest exports, coal and aluminum, help bolster foreign exchange reserves. The country halted payments on its external commercial debt in 2016 and is in restructuring talks with creditors.

Consumer prices rose 3.3 percent in May from a year earlier, according to the statistics agency. In April, inflation was 2.3 percent, the weakest since August 2015. The MPC next meets on Aug. 30.

To contact the reporters on this story: Matthew Hill in Johannesburg at mhill58@bloomberg.net;Borges Nhamire in Maputo at bnhamire@bloomberg.net

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Ana Monteiro, Renee Bonorchis

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