5 March 2018

Tunisia: BCT Key Interest Rate Raised to 5.75 Percent Per Annum

The Board of Directors of the Central Bank of Tunisia on Monday decided to increase the key rate of the BCT by 75 basis points, increasing it from 5% to 5.75% per annum, after a thorough analysis of the evolution of monetary aggregates and macroeconomic data, as well as leading indicators of the national economic situation, the Central Bank of Tunisia (BCT) reported.

Announced at the regular meeting of the Board, this action aims to face real risks of a continuation of inflation in 2018, having already reached 7.1% in February against 4.6% in the same month of 2017 and 5.3% on average in 2017, says the BCT in a statement.

An acceleration of inflation was recorded at the beginning of this year, mainly due to the sharp rise in the consumer price index (CPI) in January 2018 of 1.1% (compared to 0.4% in December 2017), added the same source.

In anticipation of this acceleration of inflation, the Board of Directors has already decided at the end of December 2017 to extend the corridor to 100 basis points on both side of the BCT's key interest rate, giving rise to a rate of marginal lending facility of 6%.

"Following this significant action on the corridor, the Money Market Rate (MMR) rose to 5.61% in February 2018, which calls for an adjustment of the policy rate to ensure a consistency of money market rates," the press release reads.

On the other hand, a number of advanced cyclical indicators, particularly the likely surge in international commodity prices and especially energy, predict further inflationary pressures in the coming period.

The central bank's concern to preserve the citizens' purchasing power and to promote the conditions for sound growth, the beginnings of which are beginning to emerge in early 2018, motivates proactive action by tightening monetary policy based on the interest rate as a preferred instrument for a better allocation of financial resources, the BCT emphasised.

Tunisia

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