Mozambique's central bank maintained its benchmark standing facility rate at 8.25 percent, saying the decision reflected the current conditions in the foreign exchange market and the need to preserve stability in light of the international, regional and domestic risks.
The Bank of Mozambique, which cut its rate by 125 basis points in 2013, also said it would ensure that the monetary base does not exceed 44.884 billion meticais in February, down from the target of 45.892 billion in January and 47.493 in December.
Mozambique's inflation rate eased to 3.16 percent in January from 3.54 percent in December, well below the 2014 inflation target of 5.6 percent.
After a stable 2013, Mozambique's metical currency has weakened sharply since mid-January, down 3.2 percent to 31 meticais to the U.S. dollar today from the end of 2013. The central bank said Reserves International Net (RIL) fell by US$ 90.5 to $2.9051 billion in January, with the fall in net reserves mainly reflecting the central bank's interventions in the foreign exchange market. The bank sold $120.5 million, of which $85.7 million was for imported fuels and $49.1 million for potential foreign exchange losses.
"The Monetary Policy Committee took note of the strengthening of the dollar in the international market that was reflected in the current conditions in the domestic foreign exchange market, compounded by the seasonal characteristics of higher demand for foreign exchange," the bank said.
Last week the bank's governor said in Kenya that Mozambique's economy was expected to expand by 8.1 percent in 2014 and 8.0 percent in 2015, with aging railways limiting mining projects and thus economic growth.
Mozambique's Gross Domestic Product expanded by 1.4 percent in the third quarter from the second quarter for annual growth of 8.1 percent, down from 8.4 percent in the second quarter.
The governor also said that average inflation of 4.2 percent in 2013 was likely to increase in 2014, but still remain in line with the bank's target.