The central bank of Mauritius left its benchmark repo rate unchanged at 4.40 percent, saying it expects inflation to remain "quite low" but added that its monetary policy committee had taken note of "the evolution of excess liquidity in the banking system."
The Bank of Mauritius, which cut its rate by 25 basis points in November last year in the first change in rates since June 2013, also said members of its MPC had discussed maintaining the rate or reducing it but a majority had decided to keep the rate steady.
In November the MPC was unanimous in its decision to cut the rate to provide further stimulus to domestic growth as inflation didn't pose any serious risks and was expected to remain low.
Since the meeting in November, the central bank said inflation had continued to decline due to low commodity prices and persistent economic slack and forecast inflation of around 2.3 percent in 2016.
In November the bank's staff had forecast inflation of around 3.0 percent for 2016 and 3.3 percent by the end of the year.
Headline inflation in Mauritius - and island nation in the Indian Ocean off the coast of Africa - eased to 0.4 percent in January from 1.3 percent in December, continuing its decline from 1.7 percent in June 2015.
CORE2 inflation, which excludes energy prices, mortgages and administered prices from the consumer basket in addition to food, beverages and tobacco, rose by 3.5 percent in January from 2.3 percent in December and 0.8 percent in January 2015.
The economy of Mauritius expanded by an estimated 3.4 percent in 2015 but is still operating below its potential level, mainly due to sluggish investment, the bank said.
The bank's staff is forecasting Gross Domestic Product growth of 3.8 percent in 2016, below its November forecast of 4.2 percent.
