(Bloomberg) -- Morocco’s central bank cut the benchmark interest rate for the second consecutive time, voicing confidence about inflation despite concerns about how Donald Trump’s protectionist policies are roiling global trade.
Bank al-Maghrib reduced the key interest rate to 2.25% from 2.5% at its latest quarterly policy meeting on Tuesday. The move was a surprise, with two of kingdom’s main lenders predicting the regulator would keep the rate unchanged. The central bank made its first rate cuts in four years in June and December 2024.
“Considering that inflation is expected to evolve at levels in line with the price stability objective, and in order to strengthen its support to the economic activity and employment, the Board decided to reduce the key rate,” Bank al-Maghrib said in a statement. It said that inflation would “revolve” around 2% over the next two years.
The North African nation has tamped down inflation that surged to a record in 2023 and is seeking to ease borrowing costs to encourage a landmark investment drive that includes preparations to co-host the 2030 FIFA World Cup.
Trump’s tariffs have complicated the picture, raising the prospect of Morocco being buffeted by a US-China trade war. The kingdom has been cultivating its profile as a manufacturing and trade hub on Europe’s doorstep open to both the West and Beijing.
Read more, from 2023: As West Battles China, a Trade Ally Tries to Keep Both Doors Open
BKGR, a research unit of Bank of Africa, said before the decision the central bank would probably opt for caution due to the “turbulent international context” and the likely impact of US policies on international trade. Moroccan inflation quickened to 2% in January, its highest in a year.
A bright spot for Morocco’s economy came in the form of March’s strong rainfall. That’s brought some relief after seven years of droughts and will likely boost supplies of homegrown staples, easing at least some food inflation through 2025.
All the same, parched conditions have taken such a toll on the nation’s livestock that King Mohammed VI this month urged Moroccans to skip the traditional sheep sacrifice made during the Muslim feast of Eid Al-Adha in June. It was the first such edict in three decades.
