The central bank of Mauritius kept its key repurchase rate steady at 4.90 percent, as expected by most economists, and cut its growth forecast amid increasing inflationary pressures.
The Bank of Mauritius, which cut is repo rate by 50 basis points in March, said it now projects economic growth of 3.3 percent for 2012, down from a previous forecast of 3.8 percent. Mauritius' Gross Domestic Product rose a real 4.1 percent in 2011, the same rate as in 2010.
Despite recent measures announced by the European Central Bank and the U.S. Federal Reserve, the central bank said there were significant risks of "prolonged sub-par growth in the main export markets."
"Considerable uncertainty remains with regard to the domestic economic outlook," the bank said in a statement following a meeting of its Monetary Policy Committee.
It said that upside risks to domestic inflation had risen, partly due to higher global food and energy prices. In August, annual inflation in Mauritius was steady at 3.7 percent, with the annual average down to 4.6 percent from 4.9 percent in July.
The inflationary risks were: recent rupee depreciation, public sector wage increases expected in upcoming salary review, a possible upward pull from public to private sector wages and the expected change in retail petrol prices.
"On current trends, y-o-y- inflation could stay at high levels," the bank said.
The monetary policy committee discussed a rate cut due to the growth outlook but a majority of the committee members felt there was need to remain cautious given the global uncertainties, continuing negative real rates of interest on savings and rising corporate indebtedness.