The central bank of Mauritius held its repo rate steady at 4.65 percent, but said members of its monetary policy committee were "divided on the need to rapidly normalize the Key Repo Rate to address the risks to inflation and the excess liquidity situation while enhancing savings in the economy."
The Bank of Mauritius, which last cut is rate by 25 basis points in June 2013, said inflation rose to 4.0 percent in December from 3.1 percent in August and core inflation had also risen, "reflecting underlying inflationary pressures in the economy" with prices of locally produced goods and services having a higher impact on inflation that prices of imported goods and services.
The bank's policy committee discussed alternative scenarios during ints meeting, with some members expecting inflationary pressures to remain subdued and economic recovery could be jeopardized by premature monetary policy tightening.
Other committee members had argued that domestic growth was firmly recovering while upside risks to inflation were rising and on the basis on unchanged rates, inflation could rise to 5 percent by the end of the first quarter of this year and end the year around 4.0 percent.
Ultimately, a majority of committee members voted to maintain the repo rate, but the bank said it would maintain "strong vigilance in monitoring economic and financial developments and stands ready to meet in between its regular meetings, if need arises."
The economy of Mauritius has continued to hold up well and economic output is estimated to be near its potential, the bank said, adding that Gross Domestic Product growth was forecast to pick up to a range of 3.7-4.0 percent this year, an increase of 0.5-0.8 percentage points above the 2013 estimated growth of 3.2 percent.