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Morocco Holds Benchmark Rate, Sees Worsening Economic Signs

Morocco Holds Benchmark Rate, Sees Worsening Economic Signs

Morocco kept its benchmark rate at an all-time low, pausing a record easing cycle even as the central bank projected a deeper economic contraction as the coronavirus pandemic ravages the tourism-reliant economy.

The decision by the central bank to hold the key rate at 1.5% on Tuesday came after authorities reported that annual inflation rose above zero for the first time since April. In its statement, Bank al-Maghrib revised its forecast for a contraction in the economy to 6.3% versus 5.2% earlier, and revised down its inflation projection for 2020 to 0.4% from the 1% it had forecast in June.

Just over half of local investors polled by a unit of the kingdom’s largest lender expected no change after 75 basis points of cuts this year.

The decision to hold comes as the kingdom has struggled to cope with the impact of the Covid-19 pandemic on its economy. The central bank said that after enacting a host of mitigating measures, its board “considered that the economy financing conditions remain adequate and decided to maintain the key rate unchanged.”

The central bank revised its budget deficit expectation to 7.9% of GDP in 2020 compared to earlier an earlier projection of 7.6%.

©2020 Bloomberg L.P.