The Monetary Policy Committee (MPC) of the Bank of Mauritius (BoM) yesterday decided by a majority vote to raise the Key Repo Rate by 25 basis points to 5.5% per annum.
The MPC noted that although the global economic recovery has slowed, it is expected to remain broadly on track for 2011 as a whole, despite uneven growth across regions and significant downside risks for a few specific economies.
MPC members felt that, with the output gap nearing zero and underlying inflationary pressures not showing signs of abating, the process of normalising the Key Repo Rate should be continued.
“While global inflationary pressures have receded lately on moderating increases in commodity prices, the underlying strength of the global economy supports the view that commodity prices would resume their uptrend in the medium term,” says the Bank of Mauritius.
The MPC also noted that a majority of central banks in emerging economies are engaged in monetary policy tightening. According BoM, the Mauritian economy has evolved broadly as anticipated at the last MPC meeting, with the recovery taking hold.
The GDP growth forecast is maintained at around 4.6% this year despite uncertainties clouding the economic prospects of some of the country’s trading partners.
“Headline inflation is expected to remain strong until the end of this year. Subsequently, it is projected to decline to around 5.4% by June 2012, much above the level reached during the first half of 2010, while year-on-year inflation is expected to reach 4.4%,” says the BoM on its website