Mozambique's central bank kept its benchmark standing facility rate (FPC) steady at 8.75 percent, saying inflation was stabilizing around the bank's objectives for this year and next.
The Bank of Mozambique (CPMO), which has cut rates in June and August by a total of 75 basis points, also said the new business confidence index had slowed down due to a deterioration in the prospects for demand and employment.
Most business sectors showed a deterioration, while the construction sector was stable and transport and communications are expected to improve, the central bank said.
In August Mozambique's inflation rate eased to 4.34 percent, down from 4.58 percent in July and the third month of declining inflation after a 2013 high of 4.9 percent in May as extensive flooding at the beginning of the year pushed up food prices and then inflation.
The central bank's policy committee also decided to intervene in interbank markets to ensure the monetary base does not exceed 43.817 billion meticais by the end of September, unchanged from the bank's August target.
The central bank's net international reserves rose by US$ 407 during August to $2.825 billion, with gross international reserves enough to cover 6.5 months of imports. End-August, the Mozambique metical was quoted at 29.85 to the U.S. dollar, a 4.04 percent depreciation year-on-year.
"The stability of the nominal metical, in a context of low inflation, has allowed for a maintenance of the external competitiveness of the economy and this has been signaled by the real effective exchange rate," the central bank said.