“Surprise decision!” This is how Attijari Global Research (AGR) qualified the lowering of 25 basis points to 2.75% of the key rate by Bank Al-Maghrib (BAM), at its second Council of the year, on June 25. A few days before the Central Bank Council, the group’s Research Center Attijariwafa Bank had published the results of a survey carried out among the most influential investors in the financial market. In this survey, the majority of opinions counted on a status quo of this rate.
In a new analytical note, AGR experts estimate that with this easing of the key rate, BAM is triggering a new, more accommodating monetary phase, which follows 4 successive status quos since June 2023. If this decision seems consistent with the orientation of the European Central Bank (ECB), it nevertheless contrasts with that of the US Federal Reserve (FED), which decided to keep its key rate stable for 11 successive times,” underlines AGR. The research center indicates that inflation in Morocco confirms its passage below the key rate, i.e. 3%, since last January. An underlying downward trend in inflation has therefore been observed since its peak of 10.1% in February 2023, a record of almost 40 years.
Based on its analysis, AGR notes two major trends that support this new accommodating strategic shift by BAM. Firstly, there is a favorable outlook for continued disinflation. Indeed, AGR analysts develop, despite the risks linked to the decompensation of butane gas in Morocco, the measures undertaken by the State for better targeting of poor populations and measures to support the purchasing power of households are insurance factors in relation to the future evolution of inflation.
The second trend concerns the monetary pivot implemented by the ECB in June. Taking the initiative for the first time in 25 years to lower its key rate before that of the FED, the ECB is thus setting the pace for the monetary pivot on an international scale. A moderate reduction of 25 basis points was therefore decided despite concerns surrounding the evolution of inflation and the risks relating to the impact of significant wage increases in the eurozone.
For AGR experts, the end of the BAM monetary tightening cycle and the start of a new accommodative cycle could be justified by three arguments. First, the confirmed decline in inflationary tensions. Then the new imperatives of supporting national growth. And, finally, the change in monetary direction on a global scale (12 central banks in the world’s Top 35 have already lowered their key rates).
As a reminder, Morocco is starting a new era of investment through the operationalization of the Mohammed VI Fund for investment, the deployment of the Southern Regions Rehabilitation Program for 120 billion dirhams as well as the major deadline of the co -organization of the World Cup in 2030.
Given the reassuring inflationary forecasts and the visible easing of pressures on national savings, AGR estimates that BAM would be willing to continue its monetary easing in 2024. The Attijariwafa bank research center further indicates that this new direction of lower international key rates would facilitate external financing of the Treasury and limit pressure on the banking liquidity deficit. According to its forecasts, BAM could make at least one reduction in its key rate during the next 12 months. But on condition that the inflationary environment remains under control.
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