- Decision
- Lower
- Rate change
- 50 bps
- MIMO policy rate
- 12.25%
The Monetary Policy Committee of the Banco de Moçambique cut the monetary policy rate (MIMO) by 50 bp to 12.25 percent, citing expectations that inflation will remain in single digits over the medium term despite heightened risks from post-election tensions, fiscal pressures and potential climate shocks. To reinforce liquidity and aid the restoration of production and supply, the committee also lowered reserve-requirement ratios to 29.0 percent for local-currency liabilities and 29.5 percent for foreign-currency liabilities. Annual inflation rose to 4.15 percent in December from 2.84 percent in November, while the central bank still foresees single-digit inflation ahead; domestic public debt increased by MZN 20.1 billion to MZN 435.6 billion. Money-market lending rates, including the Prime Rate, have continued to fall and bank credit to the economy grew 7.3 percent in January–November 2024. Foreign reserves remain “comfortable,” covering about five months of imports, supported by a stable metical. The committee said it will keep “normalising” the MIMO in coming quarters, with the speed and scale of moves guided by inflation prospects and evolving risks, and it will meet next on 26 March 2025.
Rate evolution
The Bank of Mozambique cut the MIMO policy rate by 250 basis points from 11.75% to 9.25%, with a steady easing sequence giving way to a pause in March 2026, a second hold on May 25 and a third on July 29 as risks intensified. The cuts were driven by a sustained single-digit inflation outlook underpinned by Metical stability, favourable international commodity prices, earlier policy action and later contained domestic demand, even as activity outside liquefied natural gas was weak and expected to recover only gradually. But the bank consistently stressed high uncertainty around fiscal deterioration, rising domestic public debt, climate shocks and the slow rebuilding of productive capacity and supply, then around delays in payment of domestic and external public debt that impaired securities and interbank markets, affected bank liquidity and weighed on country risk.
In the latest decisions it said floods, intensifying trade and geopolitical tensions and then the Middle East conflict had materially worsened inflation risks through logistics disruptions, domestic fuel price adjustments, intermittent fuel supply and higher energy and food prices, and later through pressure on goods supply and volatility in international fuel prices, prompting it first to signal the easing cycle was nearing its end and then to hold at 9.25% in March, May and July. Annual inflation rose to 7.5% in June from 7.2% in May after 4.4% in April, and the bank said inflation was likely to rise in the short term before easing back to a single digit in the medium term. It said the July decision was also supported by reduced excess MZN liquidity after it raised the reserve requirement on MZN liabilities to 39.0% from 29.0% in May, kept the ratio on foreign currency liabilities at 29.5%, and maintained that the direction of monetary policy would remain conditioned by its assessment of the risks and uncertainties underlying the inflation projections.