What direction for monetary policy at the end of the next meeting of the Board of Bank Al-Maghrib (BAM) scheduled for next Tuesday? This question is tormenting experts and analysts who have so far been divided between those betting on another key rate hike and those in favor of maintaining the status quo.
Motivated by the acceleration of inflation, the increase, for the third consecutive time, of the key rate last March to 3%, was intended, according to BAM, to prevent the triggering of self-sustaining inflationary spirals and to further reinforce the anchoring of inflation expectations with a view to promoting its return to levels in line with the objective of price stability.
Given this fundamental objective, a simple inventory of the national economy shows that the 2nd Council of the Bank for the year 2023 intervenes in a national context still marked by the persistence of a high level of inflation. , the continued acceleration of the money supply, driven in particular by its liquid part -fiduciary money and sight deposits-, and the improvement of bank loans to the non-financial sector.
It should, in this sense, be recalled that the consumer price index (CPI) recorded a year-on-year increase of 7.8% during the month of April, according to the High Commission for Planning (HCP). Compared to March 2023, the CPI increased by 1.4%, mainly due to the rise of 3.2% in the index of food products.
On the monetary front, recent BAM statistics highlight an increase in bank credit to the non-financial sector of 5.3% in April 2023 after 5.7% in March, as well as an annual increase in the M3 aggregate which accelerated to 7.9% in April 2023 from 7.2% in March. This annual increase mainly reflects an increase in currency in circulation of 12.2% against 11.9% a month earlier.
Next BAM Tip: Mixed Scenarios
In its June survey, Attijari Global Research (AGR) was able to identify “a consensus of investors in favor of a 25 basis point (bp) increase in the key rate”.
Thus, based on the results of the survey carried out by the subsidiary of Attijariwafa Bank among a sample of 35 financial players considered among the most influential in the Moroccan financial market, the probability of a rise in the key rate of 25 bps is 67% vs. 8% probability for a 50bp policy rate hike and 25% probability for a business as usual scenario.
For his part, the chief economist at CDG Capital, Ahmed Zhani, expects the key rate to be maintained at its current level of 3%, particularly in view of the fragility of the economic recovery, under the effect of the drought, decline in foreign demand and household consumption.
Speaking at the 1st conference of the annual webinar cycle on the results and prospects of listed companies, recently organized by the Casablanca Stock Exchange and the Professional Association of Stock Exchange Companies (APSB), Mr. Zhani explained this scenario also by the low impact of monetary policy on price stability, given the nature of inflationary pressures and the weakness of the expectations channel among Moroccan households.
And to note that with the exception of the fall in the price of imports of raw materials and energy, the evolution of the international situation induces an expected fall in the share of foreign demand and foreign direct investment (FDI) as well as ‘a tightening of international financing conditions, facts which will result, for the national economy, in a reduction in the cost of manufacturing production, a slowdown in the rate of widening of the trade deficit, a drop in the imported inflation and rising international financing costs.
Far from analysts’ forecasts, a fundamental question is currently being posed with acuteness: when and how should we feel the effects of previous increases in the key rate? Bringing hope as it has always been, the next long-awaited BAM Board meeting will certainly be the right time to provide the right answer.