Morocco’s central bank weighs steady rates against possible cut ahead of September meeting

Morocco’s central bank is facing a choice between holding or cutting its key interest rate as it prepares for its third policy meeting of the year on Sept. 23.

Bank Al-Maghrib left the rate unchanged at 2.25% in June, citing moderate inflation, steady non-agricultural growth and stable expectations.

The bank pledged then to keep monitoring how previous cuts were feeding into credit conditions, particularly for small and medium-sized businesses.

Inflation forecasts remain anchored. Analysts expect consumer prices to average 2.3% over the next eight quarters and 2.5% over the next year, according to the bank’s second-quarter report.

Lending rates to the nonfinancial sector have also fallen, with a cumulative decline of 45 basis points since Morocco began monetary easing in mid-2024.

The decision comes against a backdrop of global uncertainty. U.S. Federal Reserve policymakers recently held rates at 4.25% to 4.50% despite political pressure from President Donald Trump to cut, while the European Central Bank has paused its own rate reductions after bringing inflation back to 2%.

Domestically, optimism about Morocco’s economic outlook, boosted by stronger growth, stable finances and expectations of a good farming season, supports the case for keeping rates steady.

“The most likely scenario is that Bank Al-Maghrib will maintain the key rate at 2.25%,” said Mohamed Adel Icho, an economist and financial analyst.

Icho told Hespress AR that with domestic inflation around 1%, there is no pressure to tighten. But he noted that a rate cut could still be on the table if signs of weaker demand or sluggish lending to smaller businesses emerge.

“A 25-basis-point reduction would be a cautious move to stimulate investment and support major projects in renewable energy, infrastructure and industry,” he said.

Still, the analyst warned that easing could widen the gap with U.S. rates, putting pressure on Morocco’s currency and reserves. “Caution remains the guiding principle,” he said.