- Decision
- Lower
- Rate change
- 75 bps
- MIMO policy rate
- 10.25%
The Monetary Policy Committee of the Banco de Moçambique cut the monetary policy rate (MIMO) by 75 bp to 10.25 percent, citing the sustained outlook for single-digit inflation underpinned by metical stability and softer international commodity prices, even as fiscal, supply-side and climate-related risks persist. This move brings the cumulative easing since January 2025 to 250 bp from 12.75 percent. No changes were announced to other operating instruments, but the central bank recently lowered banks’ daily foreign-currency retention limits and raised the mandatory conversion of export proceeds to 50 percent to improve hard-currency supply. Annual inflation edged up to 4.2 percent in June from 4.0 percent in May and is projected to stay below 10 percent, while first-quarter GDP contracted 4.9 percent year on year excluding LNG, with a gradual recovery expected as lower rates and strategic projects take hold. Domestic public debt continued to climb, reaching MZN 454.3 bn, and the central bank notes elevated fiscal and climate risks. The committee will keep “normalising” the policy rate over the medium term, with the pace contingent on the inflation outlook and associated uncertainties.
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.