The Central Bank of West African States (BCEAO) held its benchmark marginal lending rate steady at 3.75 percent, saying inflation remains moderate and economic growth is continuing its upward trend toward this year's target of 6.5 percent in the eight-nation West African Monetary Union (WAMU).
The central bank's monetary policy committee, which met in Dakar on June 3, said in a statement that inflation eased to 2.3 percent at the end of April from 2.8 percent end-December due to a sharp drop in the price of local food and a small rise in petroleum product prices.
"The medium-term outlook remains consistent with the objective of price stability in the EU. At the 24-month horizon, the inflation rate would be at 2.5% yoy," the central bank said.
Interest rates in the money market have also eased, with the weighted average call rate on liquidity offers for one-week down to 2.81 percent in April from 3.07 percent in December.
Economic growth last year was better than expected, the central bank said, with Gross Domestic Product volume expanding by 6.4 percent due to higher public investment, with spillover effects on private investment, and dynamic activity in the extraction industry.
To strengthen growth, the central bank urged members of the union to increase investment in agriculture and basic infrastructure along with maintaining economic stability.
At its previous meeting in March, when BCEAO cut its rate by 25 basis points, the central bank also forecast growth of 6.5 percent this year.
In April, BCEAO Governor Tiemoko Meyliet Kone told Reuters that he expected growth of 7 percent in 2014.
Growth has strengthened due to a recovery in the Ivory Coast and strong commodities demand from emerging economies such as China and India, help the currency bloc shrug off effects of the slowdown in Europe.
BCEAO comprises the central banks of Benin, Burkina Faso, Ivory Coast, Mali, Niger, Senegal, Togo and Guinea-Bissau.