Moroccan investors are set to closely monitor the third quarterly meeting of Bank Al-Maghrib, scheduled for tomorrow, Tuesday. Analysts and financial institutions seem to reach a consensus that the central bank will maintain the interest rate at 2.25% for the sixth consecutive time. This decision comes amidst varying data reflecting a contraction in consumer prices while external pressures on energy markets continue to loom.
The upcoming meeting on September 22 takes place against a backdrop of sustained economic resilience within the local market. In its quarterly meeting in June, Bank Al-Maghrib raised its economic growth forecasts to 5.2% for 2026, before projecting a slowdown to 3.1% in 2027. A number of financial institutions are inclined towards maintaining the interest rate, as indicated by a regular survey conducted by the research center (BKGR) affiliated with Bank of Africa, the third-largest bank in the kingdom.
Inflation and Elections
Abdul Razak Maghraoui, CEO of Serval Asset Management, anticipates that Bank Al-Maghrib will keep interest rates unchanged due to a contraction in consumer prices, primarily driven by the decrease in food prices and their abundance during the summer months. Maghraoui stated in an interview with Asharq Bloomberg, "The likely decision is to maintain the interest rate, as there is a contraction in consumer prices due to the drop in food prices characterized by summer abundance." He added that the market is already pricing in a scenario of interest rate stability, noting that the rise seen so far in the domestic bond market is concentrated in medium- and long-term maturities, while short-term bonds have not experienced similar movements, reflecting expectations of no change in monetary policy.
Adel Lahlimi, founder and director of Alphabourse.ma, also concurs with the expectations of holding interest rates steady, citing local price contractions that he believes do not warrant an increase in interest rates at this time. He commented to Asharq Bloomberg, "Despite the European Central Bank and the U.S. Federal Reserve raising interest rates, Bank Al-Maghrib can afford to be patient." Lahlimi believes that the timing of the central bank's meeting, coinciding with the approach of legislative elections, serves as an additional factor supporting the decision to keep interest rates unchanged. He added, "Although Bank Al-Maghrib is independent of the government, I don’t think it will decide to raise interest rates on the eve of elections, so it will wait for the new government and its vision, program, and deficit targets before making future decisions." Moroccans are expected to elect a new parliament on September 23, which will lead to a new government for a five-year term.
The central bank has canceled the press conference it typically holds following each of its council meetings, justifying this decision by the timing coinciding with the final hours of the election campaign, emphasizing its commitment to democratic principles and institutional neutrality during this period.
Strong Economic Data
The BKGR research center indicated in a memo to clients that "the continued strength of economic activity, declining domestic inflation, and ongoing external uncertainty will prompt Bank Al-Maghrib to keep interest rates unchanged." The analysts at the center added, "This current situation provides the best balance between supporting the economy and retaining maneuvering room in the face of ongoing imported inflation risks while waiting for greater clarity regarding the actual direction of major central banks." Recent data indicates a robust economic dynamic, with GDP growth recorded at 4.8% during the second quarter of the year, compared to 5% in the first quarter. Forecasts suggest growth may accelerate to 5.4% in the third quarter, according to the High Commission for Planning, the government agency responsible for statistics. BKGR predicts a growth rate of around 5.1% for the entire year, driven by a rebound in the agricultural sector and strong investment dynamics.
On the inflation front, consumer prices experienced a shift during the summer, declining by 0.6% year-on-year in July, compared to a 0.3% increase in June, driven by a 1.9% drop in the food price index and a 4.9% decrease in fuel prices for the month alone. This decline aligns with Bank Al-Maghrib's expectations that average inflation will reach 1.5% this year before rising to 2.1% next year.
Despite the contraction in prices, caution remains prevalent among policymakers due to the ongoing rise in global energy prices and expectations of further monetary tightening internationally, limiting the room for maneuver for Bank Al-Maghrib to implement new easing measures in the near future. Pressures are mounting as fuel prices at gas stations in Morocco have recently surpassed 15 dirhams per liter, marking one of the highest levels recorded since the onset of the Iran crisis.
The international monetary policy landscape adds another factor favoring a wait-and-see approach. The European Central Bank raised its interest rate by 25 basis points in its meeting on September 10, in response to ongoing inflationary pressures tied to energy prices, while the U.S. Federal Reserve also implemented a similar increase of 25 basis points on September 16, bringing the federal funds rate to a range of 3.75%-4.00%, with a more hawkish tone regarding inflation, which is still considered relatively high. This stringent international climate, according to BKGR analysts, reduces the likelihood of any additional monetary easing by Bank Al-Maghrib in the short term, despite the return of inflation to negative territory, due to the temporary nature of deflationary factors and the resilience of national economic activity, coupled with the uncertainty surrounding the future trajectory of major global central banks.
As reported by asharqbusiness.com.
