BANK OF MOZAMBIQUE CUTS INTEREST RATES

The Bank of Mozambique on Monday decided to cut its key interest rates by half a per cent.At its monthly meeting, the Bank’s Monetary Policy Committee announced 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 be cut from 9.5 to 9 per cent, and the Standing Deposit Facility (the rate paid by the central bank to the commercial banks on money they deposit with it) will fall from 2.25 to 1.75 per cent.The Compulsory Reserves Coefficient - the amount of money that the commercial banks must deposit with the Bank of Mozambique - remains at eight per cent.A statement from the Monetary Policy Committee pointed out that the Organisation for Economic Cooperation and Development (OECD) has cut its prediction for growth in the global economy to 3.1 per cent. The Committee also warned that economic activity in the eurozone in the first three months of the year fell by 0.2 per cent, and growth in Japan is slowing down.However, it was able to report that in May the consumer price index for Maputo city showed a drop in prices of 0.41 per cent compared with a rise of 0.6 per cent in April. This was driven by a fall in prices for food and non-alcoholic beverages. Prices also fell in Beira (-1.75 per cent) but rose slightly in Nampula (0.19 per cent).The Committee indicated that this shows a recovery in fruit and vegetable production following the flooding that hit the south of the country at the beginning of the year. In addition, some international commodities have dropped in price.The national currency, the metical, has stabilised against the US dollar and strengthened against the South African rand.On the last day of May on the inter-bank exchange market there were 29.91 meticais to the US dollar, which represents a monthly appreciation of 0.37 per cent.Against the rand, the metical appreciated by 11.68 per cent and was trading at 2.95 meticais per rand (compared with 3.34 per rand at the end of April).Despite the fall in consumer prices in May, the country’s annual inflation rate rose to 4.9 per cent (up from 4.79 per cent in April).The money supply expanded by 1,597 million meticais to 40.399 billion meticais at the end of May.The Committee also reported that net international reserves fell in May by 13.2 million dollars to 2,198.8 million dollars.The next meeting of the Monetary Policy Committee will be on 12 July.