BAM Council: A drop in the key rate expected

After the reduction of the key rate to 2.75% last June, the eyes of economic actors are once again turning to Bank Al-Maghrib (BAM). The third quarterly meeting of the year 2024, scheduled for next Tuesday, is awaited with great anticipation, particularly due to speculations regarding further monetary easing.

A recent survey by Attijari Global Research (AGR) indicates that 83% of a panel of 35 major Moroccan investors expect a 25 basis point (bps) cut in the policy rate. This sentiment is driven by a context of easing inflationary pressures, although economic uncertainty persists. A reduction in the policy rate, according to these investors, would provide welcome support to a Moroccan economy facing several structural and cyclical challenges, such as the decline in agricultural production and fluctuations in international energy markets.

A consensus in favor of a decrease

The AGR survey reveals a broad consensus among investors on the need for a reduction in the key rate. Local institutional investors estimate an 85% probability of a 25 bps cut, while foreign investors unanimously support this option. This consensus is part of an international dynamic marked by similar decisions. The European Central Bank (ECB) reduced its rate to 3.5% in September, followed by the US Federal Reserve (Fed), which lowered its interest rates by 0.5 points on September 18.

This global context of monetary easing could influence BAM’s strategy, especially as several central banks around the world adopt more flexible measures to stimulate their economies. However, a dissenting voice is heard: BMCE Capital Global Research (BKGR) predicts that BAM could keep its policy rate unchanged, stressing the importance of waiting for the effects of the butane gas decompensation on inflation before any new decision.

Economic context and outlook

In this context, a reduction in policy rates could encourage investment and domestic consumption, thus providing relief to businesses and households facing high financing costs. However, BAM will also have to take into account macroeconomic balances, budgetary challenges and long-term imperatives in terms of economic stability.

LNT