- Decision
- Maintain
- Rate change
- 0 bps
- MIMO policy rate
- 9.25%
The Monetary Policy Committee (CPMO) of the Bank of Mozambique left the MIMO policy rate at 9.25 %, judging that heightened uncertainties over the Middle-East conflict—and their potential to disrupt supply chains and push up global and domestic fuel and food prices—mandate caution amid a newly higher inflation forecast. Following a 25 bp cut in January that completed a cumulative 250 bp easing cycle since May 2025, the committee instead tightened liquidity by raising the reserve-requirement ratio on metical-denominated liabilities to 39.0 % from 29.0 %, while keeping the foreign-currency ratio at 29.5 %. Annual headline inflation accelerated to 4.4 % in April from 3.4 % in March, core inflation was unchanged, and the CPMO now sees price growth potentially reaching double digits despite a weak economy and a stable metical. Domestic public debt rose to MZN 493.1 bn, with persistent arrears dampening demand for government securities and straining interbank liquidity. Externally, the metical’s stability contrasts with the uncertain global backdrop dominated by the Middle-East conflict’s effects on energy and food markets. The committee reiterated that future policy will depend on the evolution of inflation 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.