Mozambique Keeps Key Policy Rate at 9.25%

The Bank of Mozambique maintained its main policy rate at 9.25% in March 2026, keeping it at its lowest level since December 2015 and pausing the easing cycle that began in 2024. The decision reflects rising external concerns regarding inflation expectations, driven by the conflict in the Middle East, as well as domestic uncertainty surrounding production and supply chains following flood-related damage earlier in the year. Headline inflation rose to 3.2% in February, after reaching a little over one-year low of 3.04% in January. The economy expanded by 4.7% in the final quarter of 2025, following a contraction of 0.9%, reflecting improved performance. Economic growth expectations have moderated with activity projected to increase slowly and gradually. Meanwhile, domestic public debt continues to deteriorate, hindering financial markets, as delays in the payment of domestic public debt by the State persist, impacting the demand for government bonds and the rigidity of interbank rates.

The Bank of Mozambique cut its main policy rate by 25 basis points to 9.25% at its first meeting of 2026, extending an easing cycle that began in 2024 and taking borrowing costs to their lowest level since 2015. The decision was supported by expectations that inflation will remain in single digits over the medium term, despite rising risks and uncertainties, particularly from recent flooding and elevated trade and geopolitical tensions. Mozambique’s inflation rate slowed to 3.23% in December from 4.38% in November, marking its lowest level in 13 months and staying in line with the central bank’s single-digit inflation target. However, inflation is expected to pick up later this year, driven by some monetary financing of the budget deficit, the restart of major LNG construction projects, and the possibility of a metical devaluation.

The Central Bank of Mozambique cut its key MIMO interest rate by 25 bps to 9.5% on November 14, 2025, the lowest since November 2015, marking the 12th consecutive rate reduction. The decision largely reflects continued expectations of single-digit inflation in the medium term, despite concerns over delays in public debt payments. Policymakers noted that the annual inflation rate in Mozambique eased only slightly to 4.8% in October 2025, from 4.9% in the prior month. Meanwhile, the central bank warned that risks and uncertainties surrounding inflation projections remain high. "In the medium term, beyond the impacts of climate shocks and the slow recovery of productive capacity and supply of goods and services, delays in the government’s payment of domestic public debt instruments represent a significant concern.”, said Governor Rogério Zandamela.