Thursday, September 5, 2013

W. African cuts by 25 bps, risk from commodity prices

    The Central Bank of West African States (BCEAO) cut its benchmark marginal lending rate by 25 basis points to 3.50 percent,  along with its other main rates, saying the main risk to economic growth next year stems from the "negative impact of the slowdown in growth in emerging countries on the world prices of commodities exported by the countries of the Union."
    The BCEAO, which comprises the central banks of Benin, Burkina Faso, Ivory Coast, Mali, Niger, Senegal, Togo and Guinea-Bissau, said the latest estimates call for growth of 6.4 percent this year and 7.3 percent in 2014 in the members of the West African Monetary Union (WAMU).
    The central bank also cut its rate by 25 basis points in March for a total cut this year of 50 points.
    Inflation in WAMU slowed more than expected in June, the central bank said, with prices up 1.7 percent from 2.3 percent at the end of March, reflecting lower prices of cereals and lower fuel prices in some countries due to lower world oil prices.
    On average, inflation is forecast at 1.9 percent in 2013 and 2.4 percent in 2014, the central bank said following a meeting of its monetary policy committee on Wednesday. The inflation forecasts are in line with the bank's price stability objective and indicate that inflationary risks are under control.

    Over a two-year horizon, annual inflation would be 2.4 percent.
    In addition to the cut in the marginal lending rate, the central bank cut the minimum bid rate for liquidity to 2.50 percent but left the reserve ratio at 5.0 percent. The new rate takes effect from Sept. 16.



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