The central bank of Mozambique lowers the key rate once more, although by a lesser amount

For the seventh consecutive meeting, Mozambique’s central bank lowered its policy rate on Monday, but by a lesser percentage. It stated that while inflation was predicted to stay in the single digits, post-election demonstrations had increased the risks to its projections.

After six 75-basis-point reductions in 2024, the Bank of Mozambique lowers its MIMO interest rate (MZMIMO=ECI) and starts a new tab by 50 basis points to 12.25%.

In an effort to boost the economy, the bank also reduced reserve requirements on both foreign and local currency liabilities.

The impact of the protests over the disputed election result in October is probably what caused the southern African nation’s annual inflation rate (MZCPIY=ECI) to increase from 2.84% in October to 4.15% in December.

In addition to disrupting cross-border trade and affecting foreign businesses operating locally, the unrest has claimed the lives of over 300 people. These businesses include the mining companies Gemfields Group (GEMGE.L), opens new tab, and South32 (S32.AX), as well as the petrochemical company Sasol (SOLJ.J).

This month, Daniel Chapo of the long-ruling Frelimo party was sworn in as president after winning the election. The party disputes the opposition’s claim that Frelimo rigged the poll to win.

Chapo takes office at a time when Mozambique is struggling financially due to cyclones getting worse, instability, projected gas project delays, and a large amount of public debt.