GIS - 19 June, 2013: The Key Repo Rate has been brought down from 4.9 per cent per annum to 4.65 per cent that is a cut of 25 basis points following a meeting of the Monetary Policy Committee (MPC) of the Bank of Mauritius held on Monday in Port Louis.
The MPC took this decision so as to remain cautious on the monetary policy front given the domestic economy continues to remain vulnerable to the subdued external environment.
The Committee observed that the local economic performance has been below trend with slow growth in major export sectors despite diversification efforts while a significant contraction has been noted in the construction sector. It further pointed out that the output gap is projected to remain negative given the generally softer conditions in main trading-partner countries and lasting downside risks to the economic outlook.
According to the MPC the growth forecast for 2013 has been revised downwards to a range of 3.2-3.7 per cent as compared to 3.4-3.9 per cent as forecast at the previous MPC meeting. Regarding inflation, the MPC noted that headline inflation have remained broadly unchanged since the March 2013 MPC meeting with the upside risks to the inflation outlook arising mainly from the public sector wage award and possible spillovers to private sector wages.
Based on an inflation expectations survey conducted in May 2013, the Committee projected that mean headline inflation for December 2013 will work at 4.1-4.3 per cent and year-on-year inflation within a range of 5.3-5.8 per cent by December 2013.
Regarding the global economy, the Committee noted that economic conditions have remained weak and uneven since the March 2013 MPC meeting with the US economy which is recovering slowly while activity in the UK has remained gloomy and output in the euro area has shrunk in the first quarter of 2013 with France back in recession. The MPC further outlined that growth has slowed in a number of emerging economies and concurrently the global inflation outlook has been benign given significant economic slack and slower growth in commodity prices.
In the light of this scenario, the MPC continues to maintain strong vigilance in monitoring the economic and financial developments and remains ready to intervene if the need arises.