The Monetary Policy Committee (Cpm) of the Central Bank of West African States ( Bceao ) has decided to maintain unchanged the minimum interest rate for bidding on tender operations for the injection of liquidity at 2.00% and the interest rate of the marginal lending window at 4.00%, levels in force since June 24, 2020. The reserve requirement coefficient applicable to banks in the Union also remains unchanged at 3, 0%

The Monetary Policy Committee (Cpm) of the Central Bank of West African States ( Bceao ) met on Wednesday December 2 to analyze the main developments in the international economic situation and region over the recent period, as well as the risk factors that could affect the medium-term outlook for inflation and economic growth in the Union.

At the end of this fourth ordinary meeting for the year 2020, by videoconference, under the chairmanship of Tiémoko Meyliet Koné, Governor of the Central Bank, its Statutory Chairman, the Monetary Policy Committee, on the basis of its analyses, decided to maintain unchanged the minimum bidding interest rate for liquidity injection tender operations at 2.00% and the interest rate for the marginal lending window at 4.00%, levels in force since 24 June 2020. The reserve requirement coefficient applicable to banks in the Union also remains unchanged at 3.0%.

Examining the internal situation, the Committee noted that "economic activity in WAEMU increased slightly in the third quarter of 2020, in line with the lifting of mobility restrictions and the effects of the public support policies put in place", reads -on in the document sent to the press.

FALLING GROWTH RATES, REINFORCED BUDGET DEFICITS...

The press release informs that the GDP of the Union increased by "0.6% compared to the same period of the year 2019, after a drop of 2.0%" a quarter earlier. For the whole of 2020, analyze the Cpm experts, the latest forecasts place the Union's GDP growth rate at "0.9% against 5.6% in 2019". According to the document, the execution of national budgets over the first nine months of 2020 shows "a worsening of deficits" compared to the same period of the previous year, induced by the effects of the pandemic on revenues as well as the response and recovery measures taken by the States. Indeed, the budget deficit, on a commitment basis, including grants, amounted to 3,742.1 billion or 5.5% of GDP at the end of September 2020 against 1,576.3 billion or 2.4% of GDP, a year earlier. . At the monetary level, the document informs, the money supply has “consolidated” compared to the same quarter of the previous year, with an increase of “15.5% against 13.2%”. This acceleration was printed by the increases in “net foreign assets (+19.3%) and by domestic claims (+11.8%)”. Furthermore, “the Union's foreign exchange reserves have settled at a comfortable level”, ensuring the cover of 5.6 months of imports of goods and services. And this; "corresponds to a monetary issue coverage rate of 74.7% against 75.3% a quarter earlier".

On the money market, BCEAO experts point out, financing conditions have continued to ease, in line with fixed-rate liquidity injection operations since the end of March 2020 and the effects of the decision to lower key rates. , June 24, 2020. Thus, the weighted average rate of weekly liquidity injection transactions stood at 2.00% in the third quarter of 2020 compared to 2.46% in the previous quarter and 3.15% a year earlier. . The Committee noted that the general level of consumer prices stood at 2.9% on average in the third quarter, after an increase of 1.7% in the previous quarter...

This development is linked to disruptions in distribution circuits in the context of the Covid-19 pandemic, and the drop in cereal production for the 2019/2020 agricultural campaign. Consequently, the underlying inflation rate rose to "1.6%, after an increase of 1.2%" a quarter earlier. For the whole of 2020, the inflation rate is projected at 2.2% after -0.7% in 2019.

Thus, on the horizon of eight quarters, i.e. at the end of September 2022, the currency experts place the inflation rate in the comfort zone "(between 1.0% and 3.0%) defined for the implementation implementation of the Union's monetary policy'.