Tuesday, December 16, 2014

Morocco cuts rate 25 bps on "relatively low" inflation

    Morocco's central bank cut its key policy rate by another 25 basis points to 2.50 percent as inflation is expected to "remain relatively low," averaging 0.4 percent for 2014, 1.2 percent in 2015 and 1.3 percent in the first quarter of 2016.
   The Bank of Morocco, which has now cut its rate by 50 basis points this year, said the rate cut also took into account increases in minimum wages this July and in July 2015 along with the review of water and electricity prices, and projected oil prices.
    "Considering this central inflation forecast, the objective to reduce the fiscal deficit to sustainable levels and the continued improvement in foreign exchange reserves, and in order to further support economic recovery, the Board decided to lower again the key rate by 25 basis points to 2.5 percent," the central bank said.
    Morocco's consumer price inflation rate rose to 0.6 percent in October from 0.1 percent in September for a 0.3 percent decline in the first 10 months of this year compared with a 2.1 percent increase in the same 2013 period. This was mainly due to a 6.6 percent drop in food prices - compared with a 4.8 percent rise.
    Morocco's Gross Domestic Product expanded by an annual 2.3 percent in the second quarter of this year, up from a rate of 1.7 percent in the first quarter but down from 5.1 percent in the second quarter of 2013. The central bank attributed the lower growth rate this year to a 2.6 percent fall in agricultural value added after a rise of 20.2 percent last year.
    For the full year, GDP is estimated to expand by 2.5 percent and then by 4.4 percent in 2015, driven by a recovery in non-agriculture.
    Meanwhile, the unemployment rate in the third quarter rose 0.5 percentage points to 9.6 percent despite a 0.3 percent fall in the labour participation rate. The non-agricultural output gap is negative, suggesting the absence of demand-led inflation pressure, the central bank said.



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