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Mozambique's central bank lowered its new monetary policy rate for the fifth consecutive time, saying the positive performance of inflation along with projections that inflation will be in single digits by the end of this year, justified continuing the easing cycle.


The Bank of Mozambique (BM) cut its MIMO (monetary policy rate) rate by another 150 basis points to 16.50 percent and has now cut it by 525 basis points since April last year when MIMO replaced the standing facility rate as the new signal rate and set at 21.75 percent.


In addition to lowering MIMO further, the central bank also lowered the rate on its permanent lending facility by 100 basis points to 18.0 percent, but retained the rate on its permanent deposit facility at 12.50 percent along with the reserve ratio for domestic currency at 14.0 percent and the foreign currency ratio at 22.0 percent.

BM again said that its monetary policy committee would continue to monitor economic and financial data and risks and may take necessary correction action before its next meeting in June.


The committee added it is still conducting a prudent monetary policy, taking into account the risks underlying inflation, the risks associated with a sustainable public debt and the uncertainty surrounding the prices of administered goods.


Mozambique's inflation rate rose slightly to 3.05 percent in March from 2.93 percent in February but was sharply down from 21.6 percent in March 2017.


The economic climate index in February also improved for the sixth consecutive month, BM said, reflecting optimism over the prospects for employment and demand, and improved economic activity in the first quarter of this year.


However, data from February showed bank credit to the private sector continued to stagnate.


In the third quarter of last year Mozambique's Gross Domestic Product grew by an annual rate of 2.9 percent, down from 3.1 percent in the second quarter.


In the domestic market, there was a easing of pressure on the exchange rate due to the central bank's recent measures after the metical hit 62.92 to the U.S. dollar on March 15 but then rose to 60.98 on April 10.


Today the Metical was quoted at 60.89 to the dollar, down 3.2 percent this year.


BM said international reserves remained at a comfortable level, with gross international reserves at US$3.260 billion - enough for 7.2 months of imports - at the end of the first quarter, despite sales in the market to pay for fuel and external debt service.


This compares with reserves of $3.188 billion as of mid-February.

 

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