Morocco in rare low-inflation spot as Bank Al Maghreb reviews policy

Morocco’s central bank meets Tuesday with inflation well below its own forecast, giving it room to pause while it checks whether earlier rate cuts are lowering loan costs while monitoring oil and global markets.

Bank Al-Maghrib cut the key rate to 2.25% in March and held that level in June, when the board said inflation had ‘posted a very sharp slowdown’ and would ‘hover around 1 percent by end-2025,’ stabilizing near 1.8 percent in 2026.”

That projection, already low by international standards , is now being supported by summer readings that came in even softer than expected.

Headline inflation slowed to 0.3 percent year-on-year in August, with core inflation at 0.7 percent. Both sit comfortably below the bank’s target band and under its own 2025 forecast.

These figures place Morocco in an unusual position relative to peers because while inflation pressures remain stubborn in much of Europe, Morocco has seen food and energy prices cool sharply from last year’s peaks. 

The trajectory lowers immediate pressure for tighter policy and suggests loan costs could stay steady through the year’s final quarter.

But Bank Al-Maghrib’s quarterly outlook also assesses how rate settings are flowing into credit,  particularly for micro, small and mid-sized firms,  alongside growth in non-agricultural sectors, external price risks, and the stability of the dirham. 

In June, officials pledged to “closely” track whether previous easing translated into easier lending conditions before taking further steps.

Markets split on the outcome

Financial markets remain divided on Tuesday’s decision. A new Attijari Global Research survey of 45 influential market participants found a slight majority leaning toward no change, while a sizable minority saw room for a quarter-point cut. 

Earlier this month, BMCE Capital Global Research reported a similar split among institutional investors.

Local economists quoted by Hespress expect caution.  Zakaria Firano,  a professor and senior economist at Mohammed V University of Rabat said decisions are based on forward-looking studies over 12–18 months, and inflation is projected to remain within the stability band through 2026,  a backdrop that reduces the urgency for tighter policy.

Mohammed Adil Ichou , an economist cited by Hespress, called a hold at 2.25 percent the “most likely scenario,” pointing to subdued domestic inflation and a global backdrop that argues against rushing into cuts. 

Khalid Achiban, another Moroccan analyst, said a modest 25-basis-point cut cannot be ruled out if demand slows, describing it as “cautious easing rather than a shift in strategy.”

For Moroccan households, the bank’s decision translates directly into borrowing costs. If the rate is held at 2.25 percent, loans are likely to remain stable, giving families predictability as the school year begins. 

If the board opts for a quarter-point cut, the signal would be one of support for consumption and small business finance. A hike, seen as unlikely,  would risk cooling non-agricultural growth just as indicators have pointed to renewed momentum.

The meeting also sits in a broader global cycle that affects a small, open economy like Morocco’s. Europe, Morocco’s largest trading partner, is navigating uneven growth, while oil prices remain hostage to geopolitics.