Mauritius: Key Repo Rate Maintained at 4.65 per cent

The Key Repo Rate has been maintained at 4.65 per cent per annum following a meeting of the Monetary Policy Committee (MPC) of the Bank of Mauritius held on September 30 in Port Louis.

The rationale of this decision is based on the need for the MPC to provide continuous support to the economy against the backdrop of contained inflation, which they expected to remain below the Bank of Mauritius (BOM) forecasts.

The MPC observed that based on a projected impact on the Consumer Price Index for Budget 2014 and on the basis of no change in the monetary policy stance, BOM forecasts year on year inflation will remain within the range of 4.5 per cent to 4.9 per cent by December 2013, before rising to a range of 4.9 per cent to 5.5 per cent by June 2014.

Furthermore, the MPC noted that year on year inflation has declined sharply to 3.1 per cent in August 2013 after revolving around 3.6 per cent since February 2013 owing to muted food and fuel prices. Wage developments in excess of inflation and productivity gains continue to remain the main upside risk to inflation in the medium term.

On the same line, domestic economy continues to face some headwinds from economic conditions in main trading-partner countries and the output gap is projected to remain slightly negative. The Committee noted that Statistics Mauritius revised its growth forecast from 3.3 per cent to 3.2 per cent for 2013. BoM forecasts indicates that domestic growth in 2013 will be within a range of 3.1-3.5 per cent, slightly down from the projection of 3.2-3.7 per cent, made at the previous MPC meeting.

Regarding the global economy, the MPC noted that it has improved slightly since its June 2013 meeting with some improvement in the US economy although the outlook remains clouded by the fiscal deadlock. The UK has picked up within the euro area and Japan has returned to positive growth while in several major emerging economies, including China and India, growth has slowed and looks unlikely to return to previous highs, added the MPC. Concurrently, global inflation has been broadly benign, below target rates in developed economies but some emerging economies have recorded an increase in inflation as a result of depreciating currencies.

In the light of this scenario, the MPC maintains strong vigilance in monitoring economic and financial developments and stands ready to meet in between its regular meetings, if the need arises.