Released at 15:30 hours on 17 February 2016, Bank of Mauritius
The Monetary Policy Committee (MPC) of the Bank of Mauritius has decided by majority vote to keep the Key Repo Rate (KRR) unchanged at 4.40 per cent per annum at its meeting today.
The MPC took note of the January 2016 IMF’s World Economic Outlook Update. Global growth was revised down to 3.4 per cent for 2016, 0.2 percentage point lower than its October 2015 forecast. The MPC also reviewed recent developments in the world financial markets and acknowledged that risks to the global growth outlook remain tilted on the downside. The MPC would continue to monitor the heightened market volatility stemming from geopolitical risks, the rebalancing of growth in China and diverging monetary policies across regions.
The domestic economy grew by 3.7 per cent in 2015Q3, surpassing the 3.1 per cent growth in the previous quarter and 3.6 per cent in 2014Q3. However, the economy is still operating below its potential level, reflecting mostly sluggishness in investment. The MPC discussed at length productivity trends and wage growth in the economy, debt levels and trends in nonperforming loans in the banking sector. The Bank staff is projecting a real GDP growth of 3.8 per cent for 2016, which is consistent with projections by domestic and international organisations. Bank staff projections indicated a gradual closing of the output gap in 2017.
Inflation indicators have continued to decline since the previous MPC meeting, on the back of low global commodity prices and persistent slack in the domestic economy. Headline inflation fell steadily from 1.7 per cent in June 2015 to 1.2 per cent in September 2015, and remained contained within 1.2-1.3 per cent range to date. Going forward, headline inflation is projected to rise to around 2.3 per cent in 2016. Year-on-year inflation dropped from 2.0 per cent in September 2015 to 0.4 per cent in January 2016. The MPC views that domestic inflation would remain quite low in the context of subdued global commodity prices and restrained inflation in major trading partner countries.
Importantly, the MPC took note of the evolution of excess liquidity in the banking system.
The MPC carefully weighed the risks to the growth and inflation outlook. The MPC members discussed lengthily on various scenarios and weighed different factors in support of keeping the KRR unchanged at its current level of 4.40 per cent or reducing it.
The MPC will issue the Minutes of its meeting at 13:00 hours on Wednesday 2 March 2016.