Bank Al-Maghrib (BAM) announces that it has raised its key rate again to counter the inflationary wave that the country is experiencing.
For its first quarterly meeting for the year 2023, held on Tuesday March 21, the Central Bank decided to raise the key rate by 50 basis points to 3%. It was previously 2.5%.
The increase in the key rate aims to “prevent the triggering of self-sustaining inflationary spirals and further strengthen the anchoring of inflation expectations with a view to promoting its return to levels in line with the price stability objective”, argues Bank Al-Maghrib, which ensures that it closely monitors the evolution of the economic situation and inflationary pressures, both nationally and internationally.
“Bank Al-Maghrib is the policeman of monetary policy in Morocco. As such, this public institution has several tools at its disposal, including the key rate, which it has raised three times,” recalls economist Hicham Attouch.
Although part of the dynamics of the new monetary tightening of the public body, which “aims to counteract the effect of inflation”, he underlines, the latter remains, however, cautious as to the effectiveness of the new measurement.
Hisham Attouch
If we continue on this same mechanism, it’s a safe bet that we will find ourselves in chaos, faced with a structural and no longer cyclical situation.
Indeed, even if the public institution “continues to believe that this mechanism is effective or will become so”, this professor of economics at the University Mohammed V-Rabat is convinced that the resolution of the current crisis, whether it be of internal or external origin cannot be corrected by raising the key rate alone. Especially since the sources of inflation are multiple.
Cautious, he warns: “If we continue on this same mechanism, it’s a safe bet that we will find ourselves in chaos, faced with a structural and no longer cyclical situation”, he warns.
Economist Hicham Attouch interprets this mechanism on three successive occasions in these terms: “This means that the ability to forecast in the medium and long term becomes limited”. As proof, the first and second decisions to raise the key rate were not enough to curb inflation.
It should be noted that despite a relative easing of pressures of external origin, “recent data show that inflation continues to accelerate, notably under the effect of internal supply shocks on certain food products”, notes the Central Bank which took note, in this regard, of the measures put in place by the government to improve the supply of these products and ensure the proper functioning of their markets.
Measures which would not really have made it possible to improve the situation. As if to underline the seriousness of the crisis, based on data published by the High Commission for Planning (HCP), the Moroccan economist points out that 58% of inflation concerns food products.
According to Bank Al-Maghrib forecasts, inflation should remain at high levels in the medium term.
After reaching 6.6% in 2022, its highest level since 1992, it should come out in 2023 at 5.5% on average and its underlying component should stand at 6.2%, i.e. an upward revision of 2 percentage points compared to the forecast of last December, underlines BAM in a press release.
The Central Bank explains that “these projections assume that the shocks causing this increase would gradually dissipate in the second half of the year following the various measures taken by the government in this regard”.
With regard to the year 2024, on the assumption that both internal and external pressures would continue to ease, Bank Al-Maghrib announces that “the fundamental price trend would be at 2.3%”. However, the institution warns that “the scheduled start of the decompensation of the prices of subsidized products should keep inflation overall at a high level, ie 3.9%”.
Alain Bouithy