Madagascar resumes interest rate hikes to curb stubborn inflation

AFRICAN BUSINESS AND ECONOMYAugust 6, 2024 at 6:11 PM UTC

TLDR

Madagascar's central bank raises key interest rate to 11.5% from 11% due to persistent inflation concerns.
Banky Foiben’i Madagasikara increases rate for the first time in a year after three consecutive unchanged meetings.
Economy faces persistent inflation since early 2024, requiring restrictive monetary measures for inflation control.

Madagascar’s central bank raised its key interest rate for the first time in a year due to concerns over persistent inflation, making the world’s biggest supplier of vanilla an outlier among African central banks when most are leaving rates unchanged.

Following three consecutive meetings where rates were left unchanged, the monetary policy committee increased the key rate to 11.5% from 11%, the Antananarivo-based Banky Foiben’i Madagasikara announced on Tuesday.

The economy has been grappling with persistent inflation since the beginning of 2024, the central bank stated after a quarterly meeting of the MPC. The bank emphasized that restrictive monetary conditions linked to prudent demand management are necessary to curb inflationary pressures.

Key Takeaways

Annual inflation in Madagascar has averaged 7.3% this year, partly due to the high price of rice, a staple food. An analysis of the causes of price increases indicates supply-side distortions that are hampering price declines, particularly for locally-produced foodstuffs like rice. Unlike the pre-pandemic era, when rice prices typically dropped significantly during the harvest period, current rice prices have not followed the expected seasonal decreases. This deviation has contributed to the persistent inflationary pressures in the economy.

Madagascar

Interest Rates

Inflation

Banky Foiben’i Madagasikara

Monetary Policy

Central Bank