Economic Analysis - Slow Growth To Encourage Easing In 2017 - JULY 2017

BMI View: The Bank of Mauritius will cut its policy rate by 50 b asis p oint s in 2017 in the face of subdued economic growth and low inflation. In 2018 , the policy rate will remain on hold as inflation will increase and growth will improve.

The Bank of Mauritius (BoM) will cut the benchmark interest rate in 2017 to help stimulate the sluggish economy. Growth will slow in 2017 due to the impact of weak consumption in Europe and amendments to Mauritius' tax treaty with India, weighing on key sectors of the economy. While rising oil prices will offer tailwinds to inflation, we note that commodity price increases in H217 will be relatively modest, giving the bank some space continue monetary easing. Indeed, after 65 basis points worth of cuts over the past two years, we anticipate policymakers will continue monetary easing in 2017, cutting the policy rate by 50basis points to 3.50%. Thereafter, gradually rising price pressure will see policymakers shift away from easing, keeping the policy rate on hold through 2018.

Easing Cycle Will Continue In 2017

Subdued Inflation Has Opened The Door To Easing
Mauritius - Inflation and Central Bank Policy Rate
Source: Bank of Mauritius, BMI

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