Morocco’s Central Bank poised to maintain key interest rate amid economic growth and regional uncertainty

As Morocco experiences steady economic recovery and improved performance across key sectors in early 2025, the country’s central bank is set to hold its second monetary policy meeting of the year next Tuesday.

Investors, banking institutions, and the broader public are closely watching the Bank of Morocco’s quarterly gathering for clues on the future of its benchmark interest rate.

At its first meeting of the year, the central bank cut its key interest rate for the second consecutive time, and third time since June 2024, by 25 basis points to 2.25 percent. The decision was driven by inflation forecasts aligned with price stability goals and aimed to further support economic activity and employment.

This upcoming meeting unfolds against a backdrop of renewed geopolitical tension, particularly the escalation between Israel and Iran. As the conflict enters its second week, analysts anticipate it could influence the central bank’s outlook, especially as the bank’s decisions are often based on real-time economic and geopolitical developments.

Zakaria Firanou, professor of economics and management at Mohammed V University in Rabat, explained that monetary policy decisions are typically based on forward-looking projections over 12 to 18 months, with a focus on inflation trends. Firanou noted that inflation in Morocco is expected to remain within the target range of around 2 percent through 2025 and 2026.

He added that Morocco’s economic outlook is positive, with anticipated GDP growth of around 4 percent in both 2024 and 2025, supported by dynamic investment across sectors. Oil prices, which remain within the $70–75 per barrel range, are also in line with Morocco’s macroeconomic assumptions.

While Firanou acknowledged the potential for oil market disruptions stemming from Middle East instability — especially if strategic transit points like the Strait of Hormuz, the Red Sea, or the Suez Canal are affected — he concluded that the most plausible scenario is for the central bank to keep interest rates unchanged. He estimated the likelihood of such a decision at around 80 percent.

Firanou added that although uncertainty around inflation expectations may grow, actual inflation levels are unlikely to surpass the acceptable range for Moroccan monetary policy, generally considered between 2 and 3 percent.

Khalid Achaiban, an economic analyst, echoed this perspective, stating that current domestic and international indicators support the case for maintaining the key rate. He highlighted solid performance in Morocco’s non-agricultural sectors and noted that recent rainfall has improved agricultural prospects, even if the sector’s recovery remains partial.

With inflation still under control, Achaiban did not rule out the possibility of a future rate cut, should national indicators continue to improve. However, he emphasized that the central bank is likely to err on the side of caution given current volatility in global oil markets and geopolitical risks.

“The central bank is unlikely to take an uncalculated risk at this stage,” Achaiban said, referring to past meetings in which the bank opted to maintain rates despite external pressures.

Contrasting these views, a recent survey conducted by BMCE Capital Global Research found that 63 percent of institutional investors expect the central bank to lower its key interest rate by 25 basis points at the upcoming meeting.

As Tuesday’s decision approaches, the central bank faces a balancing act between sustaining domestic economic momentum and managing heightened geopolitical uncertainty, a test of its ability to navigate a complex regional and global landscape.