Bank al-Maghrib poised to cut interest rates as global easing trend gains momentum

Economic experts anticipate that Bank Al-Maghrib will likely reduce its key interest rate during its upcoming meeting on Tuesday. 

This expectation is largely driven by global trends, most notably the U.S. Federal Reserve’s decision on Wednesday to cut interest rates by half a percentage point. The Fed cited increased confidence in taming inflation as the primary reason for its move.

U.S. policymakers have indicated that the federal funds rate could see another half-percentage-point reduction by the end of this year, followed by a full percentage point cut in 2025 and a final half-point reduction in 2026. This would place the target range for the federal funds rate between 2.75% and 3.00%.

Following suit with central banks worldwide, including most of the Gulf Cooperation Council, Bank Al-Maghrib is expected to adopt a more accommodative monetary policy in its third quarterly meeting of the year. 

In Morocco, economic stakeholders and investors are eagerly awaiting the outcomes of Bank Al-Maghrib’s meeting, hoping for more reassuring indicators to stimulate an economy that has been struggling since the pandemic and subsequent crises.

Mohamed Adil Ichou, a financial analyst and economics professor, said that “given the Federal Reserve’s decision to cut interest rates by half a percentage point, it is expected that global monetary policies will move towards further easing. This trend could influence Bank Al-Maghrib’s decisions in its upcoming meeting.”

Ichou further explained to Hespress Ar that “based on current economic developments, Bank Al-Maghrib reduced its key interest rate to 2.75% in June 2024 from 3% in March, with the aim of supporting economic growth and stimulating domestic consumption and investment.”

The professor outlined three potential scenarios, with the first—a continuation of monetary easing—being the most likely. He said that Morocco’s need to finance large-scale projects, such as preparations for hosting the 2030 World Cup, supports the case for a more accommodating monetary policy. 

The second scenario involves a pause in rate changes, while the third, a tightening of monetary policy, is considered highly unlikely under current circumstances.

Salma Sedki, an economics professor at Ibn Tofail University, said that Bank Al-Maghrib will follow the trend set by major international central banks and reduce interest rates, especially given the recent decline in inflation. 

She said that there is a need to stimulate the Moroccan economy, particularly in light of the impacts of last year’s drought on the agricultural sector.