The Monetary Policy Committee (MPC) met on November 11, where a unanimous decision was taken to raise the Key Rate by 25 basis points from 4.75 per cent to 5.00 per cent per annum. The Committee at the Bank of Mauritius (BoM) has put into context that global economic activity remained resilient, despite geopolitical tensions and supply disruptions, on the back of strong investment and gains in productivity across technology-driven economies. The IMF has projected global growth at 3.1 per cent in 2026 and 3.4 per cent in 2027.
However, there are downside risks to the outlook in terms of the prevailing geopolitical tensions in the Middle East as well as threats to key maritime routes and persistent uncertainty regarding policies that could impact global growth.
In line with that, the bank forecasts real GDP growth at 3 percent in 2026 and 3.2 percent in 2027, with risks tilted to the downside while remarking that prolonged conflict in the Middle East would impact economic activity. It weighs down factors such as higher import costs, weaker external demand and tighter financial conditions, having adverse effects on exports, foreign direct investment, domestic consumption and investment.
The MPC has decided to raise the Key Rate by 25 basis points to 5.00 per cent per annum, attributed to the inflationary risk becoming entrenched at the upper end of the target range. The committee also acknowledged that higher interest rates would strain borrowers, but concluded that it was essential to maintain price stability while there is a need to contain inflationary expectations.
In a post-MPC meeting, Governor Dr. Priscilla Muthoora Thakoor made the following remarks: “Inflation remains the central concern of the committee. Headline inflation is expected to close the year at 4.7 per cent, reflecting the August and September increases in petroleum prices. The direct effects of these increases will continue to feed into CPI inflation, and we now project that headline inflation will exceed the upper bound of the Bank’s target range of 2-5 per cent in 2027. The Committee viewed the risks of inflation becoming entrenched above the target range as more significant than the risks to growth. The Committee recognises that higher interest rates burden households and firms. It nevertheless determined that a measured increase in the policy rate was the most effective way to protect purchasing power over the medium term.”
She concluded that the Committee has raised the Key Rate by 25 basis points to 5.00 per cent because inflation is above the target range, is projected to stay there through 2027, and is becoming more broadly based. “The Committee views that a timely and measured adjustment now can help avoid a delayed and larger one later, and that price stability remains the foundation of lasting growth and economic development.”
