The Monetary Policy Committee (MPC) of the Bank of Mauritius (Bank) has raised the Key Repo Rate (KRR) by 15 basis points, from 1.85% to 2% per annum.
The increase occurs for the first time in more than a decade.
L’Express newspaper described the increase as “tiny” and “below the expectations of specialists who consider it as insufficient to combat the inflationary spiral.”
The repo rate has remained at 1.85% since April 2020.
Explaining the increase, the Bank of Mauritius said that war between Russia and Ukraine has added a new layer of uncertainty to the global growth outlook which was already impacted by the Omicron variant.
In January 2022, the IMF downgraded global growth for 2022 by 0.5% to 4.4%, mainly on account of significant downward growth revisions for the US, China, Brazil and Mexico.
“These growth forecasts do not factor in the Russia-Ukraine war and, as such, may be subject to further downward revision. So far, the domestic economy has remained on its recovery path due to appropriate policy actions,” it said.
“The full re-opening of national borders has supported economic activity and is expected to provide further impetus to economic recovery this year.”
The Bank of Mauritius said it is forecasting real GDP growth between 7 – 8% for 2022 depending, among others, on the number of tourist arrivals.
It also continues to manage excess rupee liquidity in line with its monetary policy stance, it said.
“Short-term yields have remained within the interest rate corridor. Notwithstanding some improvement in FX inflows, the Bank has maintained its FX interventions to address undue exchange rate volatility and to ensure adequate supply of foreign exchange to the market,” it said.
“The capital and liquidity positions of banks are assessed to be strong and are expected to provide resilience to shocks.
The Bank of Mauritius said inflation has gained traction across several economies, reflecting rising energy and food prices and lingering supply disruptions, among others.
In parallel, it added that inflation in Mauritius has gathered momentum on the back of higher fuel prices and food products, including local fresh vegetables.
“In light of these developments, the Bank is revising its inflation projection to around 6.7 % for 2022, subject to further headwinds from the Russia-Ukraine war,
it said.
