Morocco's central bank left its key policy rate at 2.25 percent as it revised upwards its forecast for inflation this year to 1.6 percent from 0.5 percent forecast in March due to a sharp rise in food prices.
The Bank of Morocco, which in March cut its rate by 25 basis points due to a downward revision in inflation expectations and weak non-agricultural growth, added that it was raising the required reserve ratio (RRR) by 300 basis points to 5.0 percent due to improved bank liquidity and would start to pay interest on the required reserves of "banks making more efforts in terms of lending."
While the forecast for headline inflation this year was revised upwards, the central bank said the forecast for core inflation this year remained "virtually unchanged" at 0.6 percent.
Headline inflation in 2017 is seen easing to 1.0 percent, down from the previous forecast of 1.4 percent, as the shock of higher food prices dissipates while core inflation is seen rising along with fuel and lubricants.
Morocco's consumer price inflation rate eased to 1.6 percent in April from 1.8 percent in March while Gross Domestic Product grew by an annual 4.7 percent in the final 2015 quarter for full-year growth of 4.5 percent due to a 12.8 percent rise in agriculture value added and a 3.5 percent increase in non-agricultural activities.
For 2016 the central bank raised its growth forecast to 1.2 percent 1.0 percent seen in March as agricultural production was seen expanding more than expected in March - at 9.0 percent - while non-agricultural growth was seen rising 2.8 percent.
For 2017 the central bank expects growth to accelerate to 4.0 percent as agricultural value-added is expected to rise 10 percent and non-agricultural out put by 3.2 percent.
Helped by a continued strong performance of the country's automotive industry, the central bank said exports were up by 2.0 percent at the end of May, with the current account deficit seen easing to 2.0 percent of GDP this year and 0.8 percent in 2017.
