Bank of Morocco's Strategic Approach to Monetary Policy
In a recent media briefing following the decision of the Bank's council to maintain the key interest rate at 2.25%, Abdellatif Jouahri, the Governor of Bank of Morocco, outlined the reasoning and criteria behind this decision. He emphasized the importance of a fundamental understanding regarding the decision-making process, stating that the central bank relies on a forecasting model that spans eight quarters, effectively covering a two-year timeframe. Jouahri clarified that this model is not merely a set of rigid equations; rather, it constitutes a comprehensive system subjected to rigorous scrutiny. He elaborated that all assumptions are updated based on new national or international data to predict the future trajectory of inflation and growth over the upcoming two years, forming the basis for the council's decisions.
Furthermore, Jouahri stressed that while the macroeconomic model provides numerical data and trends, the final decision also incorporates what he referred to as 'the judgmental aspect.' He mentioned that the council deliberates on whether the forecasts carry upward or downward risks. In the current context, characterized by considerable geopolitical uncertainty, there is a tendency to prioritize caution over raw numbers to avoid making decisions that may require rapid reversal.
Maintaining Interest Rates Amid Economic Uncertainty
Jouahri confirmed that the reasons for stabilizing the interest rate at this juncture are linked to specific indicators. He noted that inflation has begun to trend downward, but there is a keen focus on core inflation, which measures prices excluding volatile items. Additionally, it is crucial to ascertain that previous rate hikes have been fully transmitted to the real economy, particularly regarding the interest rates applied by banks to individuals and businesses. This stabilization acts as a 'pause for evaluation' to assess the effectiveness of past decisions and the market's response to them.
Regarding the international context, Jouahri remarked that it is essential not to overlook global conditions, monitoring decisions from the European Central Bank and the US Federal Reserve, as the disparity in interest rates influences capital flows and currency value. He also mentioned that the real interest rate, calculated as the nominal rate adjusted for expected inflation, has reached positive levels, indicating that current monetary policy is sufficiently restrictive to curb inflation without necessitating further increases unless new data emerges.
On the subject of digital currency and cash circulation, Jouahri provided updates on the electronic dirham project, confirming close collaboration with a mission from the International Monetary Fund to leverage international expertise in this complex area. A specialized committee has been formed to examine all technical and legal aspects, with clearly defined priorities for this initiative. However, Jouahri cautioned that this significant shift requires adequate time to ensure the financial system's safety, suggesting that the actual implementation timeframe could extend beyond five years, as there is no room for risk concerning the stability of the national currency.
In discussing the cash dilemma, he highlighted that reducing cash circulation, which surged by 15% in 2025, is currently a top priority. The comprehensive study on cash has been completed and sent to both the Prime Minister's office and the Ministry of Economy and Finance. The bank is ready to discuss the findings swiftly, accompanied by actionable recommendations aimed at diminishing cash reliance and promoting electronic payments. Additionally, he reiterated that the regulatory framework for digital assets is prepared and will soon be presented to parliament for approval, aiming to protect citizens and the financial system from associated risks while keeping pace with global technological advancements. Jouahri concluded by stating that reducing cash isn't merely a technical measure but a national initiative that necessitates the engagement of all stakeholders, including tax authorities, banks, and production sectors.
As reported by hespress.com.
