The Monetary Policy Committee (MPC) at the Bank of Mauritius met on August 12, where it was unanimously decided to keep the Key Rate unchanged at 4.75 per cent per annum. It was observed that, on the whole, the global economy remains resilient while growth prospects differ across countries, with an increase in uncertainty coupled with renewed geopolitical tensions in the Middle East, risks to key maritime routes amidst volatile energy prices and freight costs weighing on the outlook for both global growth and inflation.
According to the World Economic Outlook Update issued in July, global growth is poised to slow down from 3.5 per cent in 2025 to 3.0 per cent in 2026, before recovering to 3.4 percent in 2027, with risks to growth remaining tilted to the downside, owing to weak demand and possible supply disruptions. While risks to inflation remain on the upside, with global inflation expectations from 4.1 per cent in 2025 to 4.7 per cent in 2026, before easing to 3.9 per cent in 2027.
An increase in energy and transport costs remains coupled with an additional rise in energy and transport costs; persistent services inflation or renewed commodity-price shocks could add pressure for a rise in prices for a long time. Set against this uncertain context, many central banks have remained cautious and data-dependent, with many choosing to keep rates unchanged during their most recent interest rate setting meetings.
On the domestic front, economic activities slowed down during the first quarter of 2026 but maintained resilience, on account of the key services sector, particularly tourism and finance, while on the aggregate demand side, weaker consumption was offset in part by investment and exports of services.
In line with the various underlying conditions, the Central Bank anticipates economic activity to show moderate resilience in 2026. Therefore, the BoM maintains the growth forecast at 2.8 percent for 2026, remaining unchanged from the earlier May projection. Therefore, the MPC has kept the Key Rate unchanged at 4.75 per cent per annum. Headline inflation remains at 5 percent, as compared to the previous estimate of 5.5 percent, with the downward revision reflecting mainly the current inflation outcome and the implementation of budgetary measures such as additional subsidies on basic commodities.
