Investors in the Moroccan market are keenly anticipating the third quarterly meeting of the Bank of Morocco, scheduled for tomorrow, Tuesday. There is a strong consensus among analysts and financial institutions regarding the decision to keep the interest rate unchanged at 2.25% for the sixth consecutive time. This decision comes amidst contrasting data reflecting a decrease in consumer prices while external pressures persist on energy markets.
The meeting on September 22 occurs in a context where the local economic activity remains robust. Earlier in June, the Bank of Morocco had raised its growth forecasts to 5.2% for 2026, which is expected to slow to 3.1% in 2027. A number of financial institutions support the scenario of maintaining interest rates, as indicated by the periodic survey conducted by the BKGR research center, affiliated with Bank Africa, the third-largest bank in the kingdom.
Inflation and Elections
Abdelrazak Maghraoui, CEO of Serval Asset Management, anticipates that the Bank of Morocco will keep the interest rate unchanged due to the contraction in consumer prices, which has been driven by a decline in food prices and their availability during the summer months. In a statement to Asharq Bloomberg, Maghraoui said, "The likely decision is to maintain the interest rate unchanged, as there is a contraction in consumer prices resulting from the drop in food prices which are abundant during the summer period." He added that the market has already priced in the scenario of stabilizing interest rates, noting that the increase observed so far in the local bond market is concentrated in medium to long-term maturities, while short-term bonds have not seen similar movements, reflecting expectations of no change in monetary policy.
Adel Lahlimi, founder and manager of Alphabourse.ma, agrees with the predictions of rate stabilization, also attributing his stance to the local price contraction, which he believes does not necessitate an increase in interest rates at this time. In a statement to Asharq Bloomberg, Lahlimi remarked, "Despite the European Central Bank and the Federal Reserve raising interest rates, the Bank of Morocco can still afford to be patient." He sees the timing of the central bank meeting, coinciding with the upcoming legislative elections, as an additional factor supporting the decision to keep rates unchanged. Lahlimi asserts that although the Bank of Morocco is independent from the government, it is unlikely to decide to raise rates on the eve of elections; rather, it will wait for the new government’s vision, program, and deficit targets before making future decisions.
Moroccans are set to choose a new parliament on September 23, which will give rise to a new government for a five-year term. The central bank had canceled the press conference typically held after each of its meetings, justifying the decision by stating that it coincides with the final hours of the election campaign, emphasizing the need to respect democratic principles and ensure institutional neutrality during this period.
Strong Economic Data
According to the BKGR research center, in a memo to clients, the continued strength of economic activity, the decline in local inflation, and ongoing external uncertainties will drive the Bank of Morocco to maintain the interest rate unchanged. The analysts noted, "This current situation provides the best balance between supporting the economy and retaining maneuvering space to face the ongoing risk of imported inflation while waiting for greater clarity regarding the actual direction of major central banks." Recent data indicates a strong economic dynamic, with GDP growing by 4.8% in the second quarter, down from 5% in the first quarter, while forecasts indicate growth could accelerate to 5.4% in the third quarter, according to the High Commission for Planning, the government agency responsible for statistics. The BKGR research center predicts an overall growth of around 5.1% for the year, driven by a recovery in the agricultural sector and robust investment dynamics.
On the inflation front, consumer prices witnessed a downturn over 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 during the month alone. This decline aligns with the Moroccan central bank's expectations that average inflation will reach 1.5% this year, before rising to 2.1% next year. Despite the contraction in prices, caution prevails among policymakers, considering the ongoing rise in global energy prices and expectations of further monetary tightening internationally, which limits the Bank of Morocco's maneuvering space for any new monetary easing in the near term. 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 Iran War.
The global monetary policy landscape adds another factor favoring the wait-and-see approach. The European Central Bank raised its interest rate by 25 basis points in its meeting on September 10, amid ongoing inflationary pressures linked to energy prices, while the Federal Reserve also raised its rate by a similar margin on September 16, bringing the federal funds rate to a range of 3.75%-4.00%, accompanied by a more stringent tone regarding inflation, which remains relatively high. This stringent international climate, according to BKGR analysts, reduces the likelihood of any additional monetary easing by the Bank of Morocco 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, alongside uncertainty surrounding the future trajectory of major global central banks.
As reported by asharqbusiness.com.
