- Decision
- Raise
- Rate change
- 150 bps
- policy rate
- 12%
Banky Foiben’i Madagasikara (BFM) raised its key policy rate by 150 bp to 12.00 %, effective 7 May 2025, aiming to curb mounting price pressures after annual inflation climbed to 8.4 % in March and is projected to remain at 8.4 % by December, well above the 5 % medium-term objective, amid higher rice, import and energy costs and brisk money growth. After keeping its marginal lending and deposit facility rates at 11.50 % and 9.50 % respectively in February 2025, the central bank has designated the policy rate as its primary instrument. BFM noted banking system over-liquidity fuelled by sustained foreign-currency inflows, with broad money expected to expand by 14.7 % in Q2 and 13.5 % from Q3, while bank credit growth quickened to 12.1 % y/y in Q1. Economic growth accelerated to 6.7 % y/y in Q1 but is forecast to moderate to 4.5 % for 2025; the current-account deficit stood at 2.3 % of GDP in Q1 and reserves covered 6.1 months of imports. Externally, escalating trade wars and persistent geopolitical tensions keep global disinflation fragile. BFM pledged to adjust policy as needed and is assessing exceptional liquidity measures to contain banking sector surliquidity and support ariary stability.
Rate evolution
From August 2025 to May 2026, the Central Bank of Madagascar kept the policy rate unchanged at 12.00%, pausing first to assess the impact of earlier tightening and later the effects of October liquidity measures for banks. The early holds reflected advancing but incomplete disinflation, with inflation easing from 8.2% in June 2025 to 7.5% in September and core inflation slowing, while rice prices, money and credit growth, and then a weaker economy and confidence after political events argued for caution rather than easing. In February and May 2026, although inflation slowed to 7.2% in December and 6.8% in March after a 6.1% January low, the bank said disinflation remained fragile because of supply distortions, excess liquidity and food prices, and, despite weaker activity, kept a restrictive stance as external cost shocks, wage spillovers and geopolitical uncertainty could lift inflation temporarily before easing from 2027, with any future calibration to be gradual.
On 4 August, the bank raised the policy rate to 12.50%, effective 5 August, after annual inflation accelerated to 8.6% in June and core inflation reached 11.4%, while monetary conditions eased and money supply growth rose to 15.1%. The increase aimed to contain projected price acceleration, preserve financial stability and anchor expectations to the 5.0% medium-term inflation objective, as continuing conflicts, global commodity prices, maritime insurance costs and the higher minimum wage threatened to sustain price pressures.