Rabat - In an attempt to stimulate an economy hurt by low agricultural output and decreased non-agricultural activity, the Moroccan central bank cut its benchmark interest rate on Tuesday for the first time since December 2014.
According to Bloomberg Business, policy makers reduced the rate - the minimum amount of interest an investor can demand for non-government securities - from 2.5 percent to 2.25 percent, according to a statement by Bank Al-Maghrib.
The central bank also lowered its growth forecast for this year to 1 percent from 3 percent and lowered the inflation forecast for 2016 to 0.5 percent, compared with 1.6 percent last year, the American news site reported.
The central bank said the rate cut will take into account “the central inflation projection, weak non-agricultural growth, the continued reduction of the budget deficit and the strengthening of foreign exchange reserves."
During the press conference revealing the change, Central bank Governor Abdellatif Jouahri declined to give a time-frame for the country’s transition to a flexible exchange rate.
Last year, Morocco said the country would change to a flexible exchange rate system, in which the value of the currency would be determined by its supply and demand. Currently, the kingdom uses a fixed-rate system controlled by monetary authorities. Officials had said the change would help Morocco become a regional financial hub.
The International Monetary Fund has been guiding Morocco on the official process for the transition. The country’s business lobby has been working with the central bank to protect small businesses from the change, Jouahri told reporters.
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