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Rate Pause Extended Again as Tunisia Gets Inflation Breather

Rate Pause Extended Again as Tunisia Gets Inflation Breather

(Bloomberg) -- Tunisia’s central bank kept its key interest rate unchanged, extending a pause that’s been in place since a hike in February pushed borrowing costs above inflation.

Policy makers left the benchmark at 7.75% on Friday. Governor Marouane El Abassi has said rates may not need to rise again this year following the increase of 100 basis points, the central bank’s first since June 2018.

Rate Pause Extended Again as Tunisia Gets Inflation Breather

The threat of double-digit inflation is receding thanks to a moderation in food costs. Price growth is now pulling back from near a quarter-century high, helping to ease alarm about Tunisia’s prospects and the perilous state of its finances.

What Bloomberg’s Economists Say

“The Central Bank of Tunisia is likely stay on hold this year as inflation moderates and economic growth slows.”

--Mark Bohlund, Africa economist
Click here to view the piece.

The dinar has stabilized since the rate hike, when El Abassi also called for additional efforts to curb inflation. In April, consumer prices rose an annual 6.9%, the smallest increase in over a year.

The bank’s directors noted the easing inflation in April, led by lower food prices, and an improved external balance, although growth slowed considerably in the first quarter from the year-earlier period.

“These developments partially reflect the contribution of the central bank’s monetary policy since last year and aimed at mitigating internal and external imbalances,” they said in a statement.

Rate Pause Extended Again as Tunisia Gets Inflation Breather

The country that gave rise to the Arab Spring uprisings in 2011 is getting some respite from inflation as its economy struggles to take off. Political infighting and a dearth of foreign investment have stymied efforts to revive growth.

Cash-Strapped Tunisia Exhales With Delayed IMF Loan on the Way

The International Monetary Fund, which in 2016 approved a $2.9 billion loan to Tunisia, has urged authorities to press ahead with cost-cutting measures -- steps that have put successive governments on a collision course with powerful unions.

To contact the reporters on this story: Tarek El-Tablawy in cairo at teltablawy@bloomberg.net;Jihen Laghmari in Cairo at jlaghmari@bloomberg.net

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Paul Abelsky, Mark Williams

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