As investors in the Moroccan market prepare for the third quarterly meeting of Bank Al-Maghrib, scheduled for tomorrow, there is a strong consensus among analysts and financial institutions regarding the expectation that the central bank will leave the interest rate unchanged at 2.25% for the sixth consecutive time. This decision is largely influenced by the contrasting data presented by a decline in consumer prices alongside ongoing external pressures in energy markets.
The upcoming meeting on September 22 occurs within a context where local economic activity continues to show resilience. In its last quarterly meeting in June, Bank Al-Maghrib had raised its growth forecast for the economy to 5.2% for 2026, before projecting a slowdown to 3.1% in 2027.
Inflation and Upcoming Elections
Abdel Razzak Maghraoui, the CEO of Serval Asset Management, expresses confidence that the central bank will keep the interest rate steady due to a decline in consumer prices, driven by a decrease in food prices and their abundance during the summer months. In a statement to Asharq Bloomberg, Maghraoui remarked, "The likely decision is to maintain the interest rate unchanged, as there is a contraction in consumer prices resulting from lower food prices, which are plentiful during the summer season." He further noted that the market has already priced in a scenario of interest rate stability, pointing out that the increase witnessed thus far in the local bond market is concentrated in medium and long-term maturities, while short-term bonds have not experienced similar movements. This reflects expectations of no change in monetary policy.
Analyst Adel Lahlimi, founder and director of Alphabourse.ma, concurs with the outlook of keeping rates unchanged, attributing this to the local contraction in prices that does not warrant a hike in interest rates at this time. Lahlimi commented to Asharq Bloomberg, "Despite the European Central Bank and the U.S. Federal Reserve raising interest rates, the central bank still has room to hold off on any changes." He believes that the timing of the central bank's meeting, coinciding with the approaching legislative elections, serves as an additional factor supporting the decision to maintain the interest rate. He stated, "Although Bank Al-Maghrib is independent of the government, I do not believe it will decide to raise interest rates on the eve of the elections; rather, it will wait for the new government’s vision, program, and deficit targets before making any future decisions."
Moroccan citizens are set to elect a new parliament on September 23, which will lead to the formation of a new government for a five-year term. Interestingly, the central bank has canceled its traditional press conference following each board meeting, citing the close timing to the final hours of the election campaign and a commitment to uphold democratic principles and ensure institutional neutrality during this period.
Strong Economic Data
The BKGR research center noted in a memorandum to clients that the "continued strength of economic activity, the decline of local inflation, and ongoing external uncertainties will prompt Bank Al-Maghrib to keep the interest rate unchanged." Analysts at the center added, "This current situation provides the best balance between supporting the economy and maintaining a margin of maneuver in the face of persistent imported inflation risks, while awaiting 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 a pickup in growth to 5.4% in the third quarter, according to the High Commission for Planning, Morocco's government agency responsible for statistics. The BKGR research center anticipates an overall growth of around 5.1% for the year, driven by a recovery in the agricultural sector and strong investment dynamics.
However, inflation has dipped into negative territory, with consumer prices decreasing by 0.6% year-on-year in July, compared to a 0.3% increase in June, primarily due to a 1.9% drop in the food price index and a 4.9% decline in fuel prices during the month. This decline aligns with Bank Al-Maghrib's expectations for average inflation to reach 1.5% this year before rising to 2.1% next year.
Despite the contraction in prices, caution remains among policymakers due to the ongoing rise in global energy prices and expectations of further monetary tightening internationally, which limits the Moroccan central bank’s ability to implement new monetary easing in the near term. The pressures are compounded by the return of fuel prices at gas stations in Morocco this month to exceed 15 dirhams per liter (approximately $1.5), marking one of the highest levels recorded since the outbreak of the Iran War.
The global monetary policy environment adds another factor leaning towards 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 persistent inflationary pressures linked to energy prices, while the U.S. Federal Reserve similarly raised its rates by 25 basis points on September 16, bringing the federal funds rate to a range of 3.75%-4.00%, with a more stringent tone regarding inflation, which they still consider relatively high. According to BKGR analysts, this tightening international climate 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, the resilience of national economic activity, and uncertainties surrounding the future trajectory of major global central banks.
As reported by asharqbusiness.com.
