Those who have followed the monetary policy pursued by Abdellatif Jouahri since his appointment as head of Bank Al-Maghrib knew that the governor would not rush to raise the key interest rate. This is despite inflation at historically high levels (not seen since 1995) and the particularly pessimistic sentiments of the population regarding rising prices and declining purchasing power.
And this is what the council he chaired today decided, preferring continued support to the economy at low rates to a counterattack against inflationary trends, which would have been Useless. It is not feasible for several reasons, as explained by Abdel Latif Al-Jawahri.
for him, Almost nothing has changed Compared to the last meeting of the Board of Directors of Bank Al-Maghrib last March. Thus there was no reason to raise the key rate.
Three arguments for a constant rate
Sure enough, the inflation forecast for 2022 rises to 5.2%, but its level is still close to the forecast in March (4.7%). Above all, the forecast for 2023 remains unchanged, with a return to normal around the 2% rate.
This is still basically inflation imported It does not depend on internal factors such as a sharp increase in demand. Therefore, an increase in the main price, Which may make access to bank credit less easyIt would be useless under these circumstances. Especially since the inflationary trends predicted by Bank Al-Maghrib are temporary.
Another element of the explanation was put forward by Jouahri: Morocco did not enter the spiral of infernal wage increases that many countries decided to mitigate the effects of inflation. Wage increases fuel the vicious circle of inflation, because the higher the household income, the greater the demand and the greater the inflationary pressures.
There have certainly been programmed increases within the social dialogue, but they are very limited. The Wali of the Central Bank indicated that its impact (520 million dirhams in 2022 and 3.2 billion in 2023 according to Jouahri) has already been incorporated into the forecasts and models of Bank Al-Maghrib.
The imported nature of inflation, the temporary peak in 2022 and the prediction of a return to normal in 2023 (2% inflation), as well as the limited effects of a wage increase, thus the current situation In terms of monetary policy. Hence the decision to keep the key price at its harmonic level at 1.50%.
A decision that takes into account Moroccan peculiarities
A decision that goes against the global trend, driven by the Federal Reserve, the European Central Bank, the Bank of England…but it takes into account Moroccan characteristics that are very different from those countries.
Abdellatif Al-Jawahiri noted that the global trend in prices has risen, but the world has not necessarily followed what the Federal Reserve or the European Central Bank decides. Of the approximately sixty central banks in the world, 27 of them did not change the price of their key. Each central bank operates according to its own peculiarities. »
Morocco has its own peculiarities, especially an urgent need to create wealth and jobs. Especially in this year 2022 where growth will drop to 1% as forecast by Bank Al-Maghrib, and where unemployment remains at a high level with an overall rate of 12.1%. Far from full employment recorded in the United States or very low rates recorded in European economies. And only 12.1% is the tree that hides the forest, youth unemployment (15-24 years old) which rose to 47.7% in the second quarter of 2022 compared to 45.6% a year ago.
By keeping the key interest rate at 1.5%, Bank Al-Maghrib is sending a very clear signal: as long as inflation remains for the next eight quarters at a fortified level (anticipate 2% in 2023), There is no reason to slow the momentum of the economywhose growth will drop to 1% this year due to the drought, but will rise to 4% in 2023. Especially since the headline rate is essential to support entrepreneurship programs and job creation such as Intelaka, financing of small and medium-sized enterprises and refinancing of banks in general …
During this entire crisis in the first six months of 2022, we responded to all requests for funding from the banking system, whether for the SME Financing Program, Intelaka or the weekly recourse of the banks to the market… We respond to everything to support economic activity Abdul Latif Al-Jawahiri said.
But this position is not consistent, warns the Wali of Bank Al-Maghrib. And it may change at any time according to the development of the global situation.
If we forecast ourselves in 2023, a return to inflation at 2% reassures us, and the Board’s decision is very appropriate in the circumstances. But if the trends in 2023 do not return to accepted standards, then it is clear that the central bank will react. Having said that, if we stay in that line, it seems to me thatThe momentum of economic recovery should not be undermined.”He said.
Follow the press conference of Abdel Latif El Jawahery live
Maintaining the key interest rate at 1.50% (Bank Al-Maghrib)