Morocco's Central Bank raises key interest rate for third time in a row

The Board of Morocco’s Central Bank decided on Tuesday to raise the key interest rate to 3 percent by a 50 basis point for the third time in a row.  

Bank Al-Maghrib said in a press release that the rise aims to curb inflation.

The Board noted that despite a relative ease in external pressures,  inflation continues to accelerate due to internal supply shocks on certain food products.

After reaching 6.6% in 2022, its highest since 1992, inflation in Morocco is expected to remain at high levels over the medium term. 

The Moroccan economy experienced a strong post-COVID-19 rebound last year, but it has since faced increasing supply shocks.

The current account deficit has risen from 2.3% to 4.1% of GDP, while real GDP growth has dropped from 7.9% in 2021 to an estimated 1.2% in 2022.

In September and December of last year, the Central Bank made a 50-point increase in the key rate.

While the World Bank predicts that Morocco’s economic growth would increase to 3.1% in 2023, a tightening of monetary policy by the Central Bank is essential to prevent a triggering of self-perpetuating inflationary spirals and further strengthen the anchoring of inflation expectations.

During Tuesday meeting, the Board welcomed the progress recently made by the country, including its removal from the FATF gray list, the Line of Credit Morocco obtained from the IMF as well as favorable conditions enjoyed by the latest Treasury issue on the international market.