Despite inflation still in double digits, the Bank of Mozambique (BoM) left interest rates unchanged yesterday at 17.25 percent, taking the opportunity to assess the impact of previous rate hikes.
The BoM has been one of the most hawkish central banks in the world in the wake of the covid-19 pandemic and, therefore, could justify keeping rates on hold despite inflation running in double-digit territory. In 2022, the BoM raised interest rates by a cumulative 400bp to combat surging inflation.
Price growth in Mozambique might cool further following a government decision not to pay public workers a thirteenth cheque in December. We are also likely to see inflation pull back in the coming months as global food and fuel prices have peaked and as the high base effects of 2022 take hold. Note that we already saw inflation slow to 10.9 percent y/y in December from 11.2 percent y/y in November.
