2023-06-22 00:54:00
Bank Al-Maghrib (BAM) marked, at the end of its 2nd monetary policy committee meeting of the year, a pause in its tightening cycle pending the transmission of the latest decisions on key rate increases (TD) to real economy, says Attijari Global Research (AGR).
“After three successive increases of 50 basis points (PBS) since September 2022, the central bank has decided to keep its main key rate unchanged at 3% in June 2023, i.e. at its highest since 2014”, underlines AGR in its latest “Research report Fixed income”, noting that this decision appears to be out of step with the market consensus which predicted a slowdown in the pace of the rise of the TD in June 2023 to +25 PBS.
Nevertheless, this “unexpected” status quo remains consistent with the downward trend in consumer prices in Morocco since March 2023.
“After reaching a peak of almost 30 years at 10.1% at the end of February 2023, inflation in Morocco slowed down for the 3rd month in a row to reach 7.1% in May 2023. However, the food inflation, the main component of the Moroccan consumer basket, remains high at 15.6% in May 2023 and underlying inflation stands at 6.4% during the same period,” explains AGR.
The two main indicators that allow us to assess the degree of transmission of monetary policy to the real economy remain the evolution of bank loans and lending rates. The TMP (weighted average time) only partially integrates the cumulative increase in BAM’s TD of +150 PBS. This rose by +53 PBS in Q1 23 to 5.03%.
On the other hand, the credit growth forecast has been revised downwards in 2023E to 3.7% once morest 4% initially. The cost of Treasury financing includes the normalization of rates and the increase in investors’ profitability requirements with a general rise in the primary curve during H1-23.
In addition, AGR identifies three points of vigilance which might influence the future direction of BAM’s monetary policy.
“Despite the deceleration of prices in Morocco, underlying inflation remains high. If the inflationary peak seems behind us on the sidelines of the easing of international commodity prices, the level of underlying inflation remains higher than those observed within the Euro Zone and in the United States”, explain AGR analysts.
Concerning the second point of vigilance, AGR points out that the TD of the European Central Bank exceeds that of BAM for the first time since 2008, specifying that the widening of the spreads between the Remuneration rates of the United States and Europe with those of Morocco might induce additional tensions on the dirham.
In addition, AGR notes that the continuous increase in the volume of liquidity within the Moroccan economy has been fueled by a long cycle of low savings remuneration, recalling that since Q4-22, real rates in Morocco have been increasing. still establish in negative territory.
The issuing institution is once once more expecting a marked increase in fiduciary circulation, in particular in connection with the rebound in the tourism sector and MRE transfers in 2023. At the same time, interest rates on savings remain relatively low. 6-month and 12-month DATs (term deposits) stood at 2.43% and 2.92% at the end of April 2023, up by +19 PBS and +25 PBS respectively.
This development should bring the liquidity needs of the banking system above 118 billion dirhams in 2024. Faced with this need, the Central Bank continues to keep the TMPs in line with the TD by satisfying all banking demand through its injections. liquidity via 7-day advances and its longer-term instruments.
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