- Decision
- Lower
- Rate change
- 50 bps
- MIMO policy rate
- 11.75%
The Monetary Policy Committee of the Bank of Mozambique on 26 March cut the MIMO policy rate by 50 bp to 11.75 percent, judging that single-digit inflation can be maintained over the medium term despite mounting fiscal-related risks. After a 50 bp reduction in January that took the rate to 12.25 percent, today’s move extends the easing cycle. Money-market conditions continue to ease, with the interbank reference rate falling further and banks passing lower rates to customers, while credit to the economy rose 5.7 percent in the year to January. Annual inflation edged down to 4.7 percent in February from 4.9 percent in January, supported by a stable metical; GDP excluding LNG is estimated to have contracted 3.1 percent in Q4 2024, and domestic public debt has climbed to MZN 447.2 billion. International reserves were described in January as sufficient to cover about five months of imports. The committee flagged heightened uncertainty from worsening fiscal risk, higher domestic debt and persistent global food and oil price pressures, and said it will keep normalising the MIMO rate, with the pace and scale contingent on the evolving inflation outlook and associated risks.
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.