The Oxford Economics Africa consultancy said yesterday that the Bank of Mozambique may adopt a new increase in the benchmark interest rate to 17.75% at its November meeting due to rising inflation.

"We expect inflation to continue to rise, to 12.4% in the fourth quarter of this year from a year earlier, which could possibly trigger a further monetary policy interest rate (MIMO rate) hike of 50 basis points at the next monetary policy meeting on November 30," write the analysts quoted by Lusa.

In a commentary on the latest rise in Mozambique's benchmark interest rate, sent to investors and to which Lusa had access, Oxford Economics Africa says that "the latest decision by the monetary policy committee suggests that they expect inflation to remain at double digits in the coming months," in line with the consultancy's forecast, which predicts a rise in prices of over 12% this year.

On Friday, the Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to increase the MIMO rate by two percentage points, from 15.25% to 17.25%, arguing with inflation and the international context.

"The measure aims to ensure the return of inflation to single digits in the medium term," the regulator said in a statement, adding, "The volatility of energy and food prices at the international level is expected to continue, in view of the prolonged conflict between Russia and Ukraine, with the potential to trigger a spiral of sustained price increases at the domestic level."

Mozambique's international reserves have "fallen consistently, from $3.56 billion in July 2021 to $2.83 billion in July this year, with the central bank intervening in the foreign exchange market to stabilize the metical's exchange rate at 63.83 per dollar," the analysts say, warning that "a continued fall in real interest rates could lead to capital outflows, which would put further pressure on international reserves and undermine the central bank's ability to maintain the exchange rate."

Year-on-year inflation in Mozambique was 12.1% in August, the highest in the last four years and 11 months, announced the National Institute of Statistics (INE).