The central bank of Mozambique lowers the policy rate but declares that the easing cycle is almost over

The central bank of Mozambique lowered its policy rate by 25 basis points to 9.25% on Wednesday, marking its 13th consecutive reduction. However, it stated that the end of its easing cycle was imminent due to concerns, such as the recent severe floods.

A 25 basis point drop was also made in the Bank of Mozambique’s most recent rate decision (MZMIMO=ECI), which was announced in November.

Governor Rogerio Zandamela listed trade and geopolitical tensions as risks impacting the economic outlook in addition to the floods, which the government estimates caused $644 million in infrastructure damage.

Mozambique’s annual inflation rate (MZCPIY=ECI) dropped to its lowest level in 13 months in December, from 4.38% in November to 3.23%.

However, Oxford Economics researchers believe that as the year goes on, inflation will increase due to a possible devaluation of the nation’s metical currency, the resumption of building of large-scale LNG projects, and some monetary financing of the budget deficit.

The International Monetary Fund and Mozambique are negotiating a new credit program. The president has stated that the government may try to restructure its debt once an agreement is reached.