Mozambique cuts key rate for 5th meeting in a row

Central banks across Africa are navigating a cautious rate cycle as they make monetary policy decisions with a keen eye on the exchange rate. This trend is expected to continue throughout 2024 and into 2025, shaping the economic landscape of the continent. In a recent development, Mozambique's central bank slashed its main interest rate for the fifth consecutive meeting, citing a favorable inflation outlook. On the other hand, Angola's central bank opted to keep its main interest rate unchanged following a period of easing inflation. Fáusio Mussá, the Chief Economist at Standard Bank Mozambique, shed light on the macroeconomic factors influencing these decisions during a CNBC Africa interview. The key theme underlying these rate decisions is the delicate balance between inflation, exchange rates, and external pressures. Key points discussed during the interview include Mozambique's declining inflation rate, high cash reserves, and risks related to balance of payments and fiscal pressures. In contrast, Angola's measured approach to interest rates, stability in currency, and progress on economic reforms were highlighted as significant factors shaping its monetary policy. Looking ahead, Mozambique's upcoming general elections and the need for continued external support to address climate change effects and debt sustainability were underscored as critical considerations. Overall, the economic landscape in Africa remains dynamic, with central banks playing a pivotal role in steering the course of monetary policy. Amidst global economic uncertainties and regional challenges, the decisions made by these institutions will have far-reaching implications for the growth and stability of the continent's economies.