- Decision
- Lower
- Rate change
- 25 bps
- MIMO policy rate
- 9.5%
The Monetary Policy Committee of the Banco de Moçambique cut the monetary policy rate (MIMO) by 25 bp to 9.50 percent, citing sustained single-digit inflation—4.8 percent in October after 4.9 percent in September—and the Metical’s stability, but warning that elevated risks and uncertainties, notably the government’s delayed servicing of domestic debt, cloud the inflation outlook. This move extends a year-to-date easing cycle that has lowered the MIMO rate by a cumulative 275 bp from 12.25 percent in January 2025. The committee noted that payment arrears are eroding demand for government securities and keeping interbank rates rigid, while domestic public debt has climbed to MZN 465.8 billion, up MZN 50.3 billion since December 2024. It sees favourable international commodity prices supporting the disinflation trend but flags persistent vulnerabilities from fiscal strains, climate shocks and weak supply-side recovery. The central bank pledged to maintain a prudent stance, with future policy decisions governed by its assessment of the evolving risk environment around inflation projections.
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.