- Decision
- Raise
- Rate change
- 50 bps
- policy rate
- 12.5%
The Central Bank of Madagascar raised its policy rate by 50 basis points to 12.50%, effective August 5, to curb renewed inflation pressures, preserve financial stability and steer inflation toward its 5.0% medium-term target. It had held the rate at 12.00% from August 2025 through May 2026. Annual inflation accelerated to 8.6% in June, driven mainly by underlying inflation, while the central bank projected economic growth of 3.0% in 2026 and reported faster-than-expected money supply growth of 15.1%. The ariary appreciated against the euro and USD in the first half, while foreign-exchange reserves covered 7.0 months of imports at end-June. The Middle East conflict is disrupting supply chains and raising product prices globally. The central bank said it will closely monitor domestic and international conditions and take necessary measures to maintain macroeconomic and financial stability.
Rate evolution
From August 2025 to May 2026, the Central Bank of Madagascar kept the policy rate unchanged at 12.00%, pausing first to assess the impact of earlier tightening and later the effects of October liquidity measures for banks. The early holds reflected advancing but incomplete disinflation, with inflation easing from 8.2% in June 2025 to 7.5% in September and core inflation slowing, while rice prices, money and credit growth, and then a weaker economy and confidence after political events argued for caution rather than easing. In February and May 2026, although inflation slowed to 7.2% in December and 6.8% in March after a 6.1% January low, the bank said disinflation remained fragile because of supply distortions, excess liquidity and food prices, and, despite weaker activity, kept a restrictive stance as external cost shocks, wage spillovers and geopolitical uncertainty could lift inflation temporarily before easing from 2027, with any future calibration to be gradual.
On 4 August, the bank raised the policy rate to 12.50%, effective 5 August, after annual inflation accelerated to 8.6% in June and core inflation reached 11.4%, while monetary conditions eased and money supply growth rose to 15.1%. The increase aimed to contain projected price acceleration, preserve financial stability and anchor expectations to the 5.0% medium-term inflation objective, as continuing conflicts, global commodity prices, maritime insurance costs and the higher minimum wage threatened to sustain price pressures.