- Decision
- Lower
- Rate change
- 75 bps
- MIMO policy rate
- 11%
The Monetary Policy Committee (CPMO) of the Bank of Mozambique cut the monetary policy rate (MIMO) by 75 bp to 11.00 percent, citing the continued consolidation of a single-digit inflation outlook amid favourable international price dynamics despite persistent domestic fiscal, supply-side and climate-related risks. This marks a cumulative 175 bp easing since January 2025. The communiqué notes that money-market and Prime lending rates are still falling in line with earlier policy moves. Annual inflation slowed to 4.0 percent in April from 4.8 percent in March, with core inflation also easing, helped by a stable metical and lower global goods and services prices. The banking sector remains sound, with a solvency ratio of 26.5 percent and a liquidity ratio of 59.5 percent in March, although domestic public debt rose to MZN 445.9 bn, increasing banks’ sovereign exposure. The committee highlighted the favourable trajectory of international prices as a supportive external factor. It reiterated that further normalisation of the MIMO rate will depend on the evolution of inflation projections and associated risks over the medium term.
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.