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Mauritius Central Bank raises interest rate for the 5th time, sparks outcry

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Mauritius Central Bank raises interest rate for the 5th time, sparks outcry

The Monetary Policy Committee (MPC) of the Bank of Mauritius has again raised, for the fifth time this year, the Key Repo Rate (KRR), this time by 50 basis points to 4.50% per annum at its meeting held on Wednesday 14 December. The KRR was 1.85% in December 2021.

The repo rate is the rate at which the Bank of Mauritius lends money to commercial banks. When the repo rate increases, it means interest rates on your debt/loans will increase too.

The Central Bank explained that the recovery process of the domestic economy is “well entrenched” and broad-based, underpinned by greater dynamism across major sectors of the economy, including tourism. The Bank projects real GDP growth at above 7.0% for 2022 and at around 5.0% for 2023. It also projects inflation at 10.6% for 2022.

“With major central banks pursuing their tightening stances, yield differentials may persist and, if unaddressed through appropriate policy locally, may fuel inflation through the exchange rate channel,” it said.

The MPC reportedly deliberated that the positive growth performance so far continues to “provide leeway for a normalisation to anchor inflation expectations and bring inflation in 2023 down to below 6.0%.”  

“Consequentially, the MPC opted for a less aggressive rate hike of 50 basis points which would help close yield differentials with other countries, contain FX volatility and inflation pressures, whilst not undermining growth.”

Avoid taking loans

Reacting to the increase, the Consumers Association of Mauritius (ACIM) has warned against “taking a bank loan at all costs”.

Speaking to RadioPlus, ACIM Secretary General Jayen Chellum said the repo rate had doubled in six months.

Reform Party’s Roshi Bhadain blasted the Bank of Mauritius claiming the move will “directly hit the most vulnerable and the middle – those who are struggling to make ends meet.” From now on, he added, interest rates on bank loans are set to rise.

He also expressed doubts about the Bank of Mauritius’ forecasts for inflation and economic growth.

Source: Bank of Mauritius, Defi Media, Top FM

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The information and opinions expressed in our published works are those of authors/sources believed to be reliable. NewsMoris makes no representations as to accuracy, completeness, suitability, or validity of any information expressed.