The Monetary Policy Committee of the Bank of Mozambique, meeting in Maputo on Friday, decided to keep the bank’s key interest rates unchanged for at least another month.The statement issued by the Committee said that the Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) will remain at 8.25 per cent.The Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) remains at 1.5 per cent, and the Compulsory Reserves Coefficient - the amount of money that the commercial banks must deposit with the Bank of Mozambique – is also unchanged at eight per cent.It is now 13 months since there was any change in the Central Bank’s interest rates. The last alteration was in October 2013, when the Standing Lending Facility was cut by 50 base points, from 8.75 to 8.25 per cent.The Committee also decided that the central bank will intervene in the inter-bank markets in order to ensure that the monetary base does not exceed 53.786 billion meticais (about 1.74 billion US dollars, at current exchange rates) by the end of October. At the end of September, the monetary base had reached 52.846 billion meticais, 1.5 per cent lower than the target of 53.648 billion meticais.The monetary base had risen by 863 million meticais in September. Bank reserves had risen by 209 million meticais (1.1 per cent), and the amount of notes and coins in circulation by 654 million meticais (two per cent). Over the past year, the monetary base has risen by 9.4 billion meticais (21.7 per cent).The statement from the committee noted that, according to the consumer price index for the three major cities (Maputo, Beira and Nampula), the September inflation rate was minus 0.17 per cent. September was thus the fifth successive month in which prices fell.
Prices rose in the first four months of the year – by 0.98 per cent in January, 0.39 per cent in February, 0.91 per cent in March and 0.12 per cent in April. Then inflation turned into deflation and prices began to fall – by 0.38 per cent in May, 0.52 per cent in June, by 0.04 per cent in July, by 0.55 per cent in August, and now by 0.17 per cent. The result is that accumulated inflation over the year – from 1 January to 30 September – stands at 0.71 per cent.The monetary policy committee commented that the behavior of inflation over the last five months “is explained by the greater offer of fruit and vegetables, and by the stability of the metical on the exchange market, supported by the Bank of Mozambique making an adequate amount of foreign currency available”.At the end of September, the metical was quoted at 30.8 to the US dollar on the Inter-Bank Exchange Market, which was a depreciation over the month of 0.95 per cent. Since the start of the year the metical has depreciated by 2.84 per cent against the dollar.The metical rose against the South African rand in September. There were 2.75 meticais to the rand at the end of the month, compared with 2.89 on 31 August. The metical thus appreciated against the rand by 4.84 per cent over the month, and by 3.51 per cent since the beginning of the year.Preliminary figures for the end of September show a fall of 158.3 million US dollars in Mozambique’s net international reserves. By the end of the month, the reserves stood at 3.093 billion dollars, enough to cover 4.3 months of imports of goods and non-factor services (excluding the imports made by the foreign investment mega-projects).As for commodity prices, the Committee noted that the price of Mozambique’s main export, aluminium, is continuing to increase. In August the world market price of aluminum rose by 4.29 per cent. Over the year from September 2013 to August 2014, aluminium prices rose by 11.8 per cent.Coal prices are continuing to fall, which must be a matter of considerable concern for the companies who have invested heavily in coal mining in the western Mozambican province of Tete. In August the price of coking coal fell by 1.4 per cent and of thermal coal by 0.4 per cent. Over the past year the price of coking coal fell by 24.4 per cent. August also saw another sharp fall – of 10.4 per cent – in the international price of natural gas.One item of good news for Mozambique is that the price of the liquid fuels it imports is continuing to fall. The benchmark Brent Crude was quoted at 94.67 US dollars a barrel on 30 September, but fell to 84.47 dollars a barrel on 16 October.