- Decision
- Lower
- Rate change
- 50 bps
- MIMO policy rate
- 9.75%
The Monetary Policy Committee of the Bank of Mozambique cut the monetary policy rate (MIMO) by 50 bp to 9.75 %, judging that single-digit inflation will persist over the medium term thanks to a stable metical and easing international commodity prices, even as domestic risks and uncertainties remain high. The move deepens an easing cycle that has lowered the MIMO from 12.25 % in January 2025 to 9.75 %. No additional liquidity or reserve-requirement measures were announced. Annual inflation accelerated to 4.8 % in August from 4.0 % in July and core inflation inched up, yet the committee still foresees sub-10 % price growth; GDP excluding LNG contracted 1.7 % in Q2 after a 9.6 % expansion in Q1—falling 9.9 % including LNG—though a gradual recovery is expected as strategic projects progress. Domestic public debt rose to MZN 454.4 bn, an increase of MZN 38.1 bn since December 2024, intensifying fiscal pressures. The favourable global commodity-price outlook supports the disinflation narrative. The committee signalled that further, but moderate, normalisation of the MIMO will continue as warranted by the inflation outlook and associated risks, and it set the next policy meeting for 20 November 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.