The Monetary Policy Committee of the Bank of Mauritius is set to decide on the key interest rate, currently at 4.75%, at its meeting on Wednesday. Observers expect the rate to be maintained, but a hike is also possible. The goal is to contain inflation without further weakening economic growth. The key interest rate influences the cost of credit, with a hike potentially slowing demand and limiting inflationary pressures, but also risking increased borrowing costs and reduced consumption and investment.
A rate hike could contribute to slowing demand and limiting inflationary pressures, but it may also weigh on an economy with fragile private investment. According to projections, Mauritius' growth is expected to reach 3% in 2026, down from 3.5% in 2025. Amit Bakhirta, CEO of Anneau, and economist Manisha Dookhony, advocate for maintaining the status quo to preserve a balance between controlling inflation and supporting economic activity.
The inflation rate in Mauritius has been rising, reaching 5.7% in September, up from 2.1% in June and July. The annual average inflation rate stands at 4.1%, with Statistics Mauritius forecasting an average of around 5% for 2026. Manisha Dookhony notes that part of the inflationary pressure is due to external factors, including geopolitical tensions, energy costs, and rising import prices.
A depreciation of around 2.8% of the rupee against the dollar has also contributed to inflationary pressures. However, Dookhony argues that raising the key interest rate would not directly impact international oil prices or maritime freight rates. The Committee's decision will be crucial in determining the course of economic growth and inflation in Mauritius.
Despite the possibility of a rate hike, observers believe that maintaining the current rate is the most likely scenario. Amit Bakhirta notes that a premature rate cut could reduce the attractiveness of rupee-denominated investments, leading to additional pressure on exchange rates and import prices.
Suttyhudeo Tengur, president of the Association for Environmental and Consumer Protection, highlights the potential consequences of a rate hike for businesses and households with variable-rate loans. The Committee's decision will have significant implications for the economy, and stakeholders are eagerly awaiting the outcome.
The Bank of Mauritius' Monetary Policy Committee must carefully weigh the competing pressures of inflation and economic growth when making its decision. The current key interest rate of 4.75% has been in place for some time, and any changes will have far-reaching consequences for the economy.
Key points
- Maintaining the key interest rate at 4.75% is the most likely scenario, according to observers.
- Rising inflation and fragile economic growth are key considerations for the Monetary Policy Committee.
- A rate hike could weigh on economic growth, while a premature rate cut could lead to additional pressure on exchange rates and import prices.
