BOM will probably increase its benchmark interest rate

10 years, 8 months ago - March 25, 2011
“Our concern is to fight inflation increases,” Bheenick said

Mauritius’s central bank will probably increase its benchmark interest rate from 4.75 percent on March 28 after inflation accelerated more than expected.

“It’s a done deal that the rate will increase,” Eric Ng, an economist and director of the Port Louis-based advisory firm PluriConseil, said yesterday in a phone interview from Port Louis, the capital. “The debate is now by how much will it rise, ensuring at the same time that growth does not take a blow. An increase by 25 basis points might not be enough to control inflation.”

Annual inflation climbed for a fifth consecutive month to a more than two-year high of 6.8 percent in February, according to the Indian Ocean island nation’s statistics agency. Gasoline prices jumped twice in three months after international oil prices increased. The rise in prices exceeded Bank of Mauritius Governor Rundheersing Bheenick’s forecasts.

“Our concern is to fight inflation increases,” Bheenick said on March 23. “I hope that the monetary policy committee takes appropriate decisions.”

A survey of 30 analysts, published in the Port Louis-based l’Express newspaper on March 16, showed that 12 expect an increase in the benchmark rate of 25 basis points to 5 percent, with 10 forecasting a 50 basis-point rise. The remainder said the rate will stay at 4.75 percent.

“There is lack of visibility as to whether we are facing inflation or a growth problem, or both,” said Afsar Ebrahim, a partner at Port Louis-based auditing company BDO & Co Ltd. “The cautious approach will be to leave the rate as is because there are too many businesses already in a precarious state.”

The repo rate is at its lowest since December 2006, according to data on the central bank’s website. It was cut by one percentage point in September.

Text by Bloomberg

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