Morocco’s central bank, Bank Al Maghreb (BAM), announced on Tuesday that it is keeping the benchmark interest rate unchanged at 2.75%.
In a statement, BAM maintains that while global economic activity remains resilient, many advanced and emerging economies are poised for a slowdown, largely due to restrictive monetary policies. Inflation trends are also showing signs of easing, although price pressures in services persist.
Interest rates dictate the borrowing cost. When rates are low, loans become less expensive. Hence, higher rates can cool demand, as borrowing becomes more expensive, often leading to slower economic growth.
Domestically, the central bank noted that inflation has stabilized at moderate levels, primarily due to a decrease in volatile food prices. Core inflation, which surged to 5.6% in 2023, has now hovered around 2%, with BAM projecting it to remain in this range over the next two years.
Headline inflation is forecasted to decline from 6.1% in 2023 to 1.3% in 2024, before gradually increasing to 2.5% by 2025.
BAM pointed to the ongoing recovery in non-agricultural sectors, driven by anticipated increases in public and private investment, despite the continued uncertainty stemming from agricultural production, which is heavily reliant on weather patterns.
The bank also addressed potential risks linked to geopolitical tensions and the impacts of climate change on farming outputs.