2023-09-20 15:44:36
In this context marked by a decline in inflation and a significant demand for financing, following the earthquake which struck the Al Haouz region, it would be preferable not to increase the key rate, at least for the moment. This is the opinion of several market observers.
As the Bank Al-Maghrib (BAM) meeting approaches, scheduled for September 26, financial market observers are unanimous in recommending maintaining the status quo in terms of key rates. This pause in the monetary tightening cycle, initiated last June, would be maintained given the evolution of the country’s macroeconomic aggregates. “There is no suspense this time around the probable increase in the key rate, however it will be even more present next December,” says a market source.
This belief is largely due to recent economic developments, including the earthquake that struck the Al Haouz region, which had the effect of consolidating the prospect of monetary stability. However, it should be noted that certain elements might potentially influence BAM’s decision in the future, “in particular, gas and oil prices which have experienced significant fluctuations, potentially changing the economic situation. However, the effects of these variations should not appear immediately, but rather over the coming months,” we are told.
The why of consensus
Inflation is an important element taken into consideration in the analysis of market operators. The latest Consumer Price Index (CPI) statistics show year-on-year inflation below 5%, which can be interpreted as a sign of price stability. Furthermore, previous statements by the Governor of the Central Bank, in June 2023, clearly indicate his willingness to observe and assess the cumulative impact of previous increases in the key rate on the real economy, as well as the effectiveness of anti-inflation budgetary measures provided for in the 2024 Finance bill.
However, a market participant states that “it is still too early for BAM to assess the concrete impact of these measures, as the precise details are not yet available. The framework note only lists the priorities. The concrete anti-inflation measures, which the government has promised to adopt, are not yet clear.” Another key element is the transmission of BAM’s recent decisions, notably the three successive increases of 50 basis points.
This transmission is just beginning to materialize, resulting in a deceleration of credit and the money supply. Regarding the foreign exchange market, although the national currency has lost its value slightly recently, due to the recent announcement on the key rate of the European Central Bank (ECB), the situation remains generally stable, with a rate dollar exchange rate of between 10.18 and 10.20 dirhams. The current account of the balance of payments also shows signs of resistance, reinforced by the stock of the country’s foreign exchange reserves, which reaches nearly 360 billion dirhams. This robustness helps maintain the value of the national currency once morest foreign currencies.
Indirect impact of the Al Haouz earthquake
Finally, the impact of the recent earthquake, although indirectly linked to the key rate, is a factor to take into account. “Estimates suggest that an overall envelope of 50 billion dirhams will be necessary for the mobilization of resources linked to the disaster,” notes an analyst. Although this may have an immediate negative effect on economic growth, it is expected to result in a positive impact in the medium term, particularly through the reconstruction of the region, which will require additional spending.
In this logic, and in a context of intense financing demand, it is explained to a market operator that “it is therefore preferable to maintain the key rate at 3%, in this context of significant demand. Because it is essential, during this period, that financing conditions do not become more difficult.” On the stock market front, we can note that there was no significant reaction from investors. “In general, financial markets tend to anticipate decisions, as we saw last June, when the market was divided,” recalls a broker. However, this time around, traders are not showing a marked reaction, either in the stock or bond segment. In short, the market seems to adopt an attitude in favor of maintaining the current stability.
Sanae Raqui / ECO Inspirations
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