- Decision
- Lower
- Rate change
- 25 bps
- MIMO policy rate
- 9.25%
The Bank of Mozambique’s Monetary Policy Committee cut the monetary policy rate (MIMO) by 25 bp to 9.25 %, saying the single-digit inflation outlook remains intact even as floods and intensifying trade and geopolitical tensions add to uncertainties. The move extends the easing cycle that has lowered the MIMO from 12.25 % in January 2025. Annual inflation fell to 3.2 % in December from 4.4 % in November and core inflation also slowed, helped by a stable metical, contained domestic demand and steady international commodity prices. Excluding LNG, GDP contracted 1.3 % y/y in Q3 after a 1.7 % decline in Q2, and the committee expects only a gradual recovery as climate shocks weigh on activity. Domestic public debt rose to MZN 485 bn, up MZN 11.1 bn since December, with delayed debt payments dampening appetite for government securities and keeping interbank rates rigid. The committee noted that the end of the easing cycle is near and future policy will hinge on its assessment of evolving risks and 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.