The Central Bank of Mauritania's Monetary Policy Council has stated that the accelerating inflation rate, which hit 9.3% in September, requires a tightening of monetary policy. The council warned that maintaining interest rates below the inflation rate, combined with excess liquidity in banks, could weaken the effectiveness of monetary policy and fuel price pressures.
The council noted that the current 6.75% benchmark interest rate corresponds to a negative real interest rate of around 2.5%, which, coupled with rising banking liquidity, could undermine the transmission of monetary policy to the economy and foster second-round inflationary effects. To address these pressures, the council emphasized the need for action on two fronts: interest rates and structural liquidity, aiming to preserve stable inflation expectations.
The inflation rate has been steadily increasing, from 8.5% in July to 8.9% in August and 9.3% in September, with food products contributing approximately 6.8 percentage points to the recorded rate. The council observed that price pressures have expanded to non-perishable goods, which are part of the underlying inflation components, and have been rising continuously since September 2025.
The council acknowledged that tightening monetary policy would not directly address supply-side shocks that have contributed to the price increase, but it aims to limit the propagation of their effects to the rest of the economy. The bank has intensified its liquidity withdrawal operations in October to bring banking reserves back to the target level.
The excess liquidity in banks is evident, with free banking reserves standing at 4.35 billion ouguiyas as of October 27, more than four times the daily target reserve of 1 billion ouguiyas. The balance of open market operations reached 17 billion ouguiyas, including 12 billion ouguiyas in "Sinad" certificates.
In terms of economic activity, the council forecast a 5.2% growth in Mauritania's economy in 2026, up from 3.6% in 2025, driven by investment and non-extractive sectors. However, the council noted a slowdown in the extractive sector's production in the third quarter, with a 19% decline in iron ore production and a 6% decrease in gold production compared to the previous quarter.
The council also warned that rising oil prices, with Brent reaching $114.62 per barrel, could increase the energy bill and transportation costs, thereby heightening the risks of imported inflation being passed on to the local market.
Key points
- The Central Bank of Mauritania's Monetary Policy Council has called for tighter monetary policy to address the rising inflation rate, which reached 9.3% in September.
- The council noted that excess liquidity in banks, with free reserves standing at 4.35 billion ouguiyas, could undermine the effectiveness of monetary policy.
- The council forecast a 5.2% growth in Mauritania's economy in 2026, driven by investment and non-extractive sectors.
