{"id":18170,"date":"2022-07-16T09:31:50","date_gmt":"2022-07-16T09:31:50","guid":{"rendered":"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2"},"modified":"2022-07-16T11:12:34","modified_gmt":"2022-07-16T11:12:34","slug":"the-decision-to-keep-repo-rate-unchanged-2","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2","title":{"rendered":"The Decision to Keep Repo Rate Unchanged"},"content":{"rendered":"

Africa-Press – Mauritius. <\/strong><\/span>GDP growth appears to be unaffected by changes in interest rates in the economy<\/b><\/p>\n

The Bank of Mauritius (BoM) stated on 20th February that its Monetary Policy Committee (MPC) of that day had decided to leave its key interest rate unchanged at 4%.
\nIt may be recalled that the Monetary Policy Committee (MPC) had brought down the rate from 4.4% to 4% in July 2016 and that, at its intermediate November 2016 meeting, it decided to stay put at 4%.
\nThe BoM has stated that the amount of excess liquidity absorbed by the BoM for liquidity management purposes was Rs 56.3 billion in July 2016, 58.2 billion in October 2016 (just before the November MPC) and Rs 59 billion this February.<\/p>\n

In other words, despite the drop in the BoM\u2019s key interest rate, there has been no significant inroads made into the amount of excess liquidity floating in the system.<\/p>\n

In fact, the amount of excess liquidity absorbed by the BoM during the intervening period has increased, showing that demand for additional credit (which reduces excess liquidity) has not been stimulated by the BoM rate reductions to curtail excess liquidity in the system.
\nThe reality is that, as things stand at present, the elasticity (responsiveness) of credit demand to interest rate changes is negligible or insignificant.
\nThis means that the BoM (and government to the extent Government Securities have also been issued) remunerated the excess liquidity mopped up from the financial system at a yield close to 4.4% last year before the July meeting. The rate of remuneration of the mopped up liquidity has fallen to around 4% since November 2016.<\/p>\n

On their part, financial institutions which invest in the BoM securities their surplus funds have reduced the rate at which they remunerate all their own depositors, to reflect the BoM decision to reduce its own key interest rate.<\/p>\n

The amount of excess liquidity in the system remaining more or less unchanged shows that there is hardly any impact of the BoM\u2019s decision on the demand side for credit from financial institutions.
\nThat is, rate reduction by the BoM does not act as a spur to raise demand for credit in the economy. The reason for this state of affairs must be that enterprises which usually borrow to support activities don\u2019t have the need to borrow.
\nIn such a situation, increasing levels of total credit on the balance sheets of financial institutions would, to a large extent, simply be reflecting the amount of additional interest capitalised in the borrowers\u2019 accounts over time, not fresh credit granted on account of reduced interest rates.<\/p>\n

GDP growth appears to be unaffected by changes in interest rates in the economy. Banks, for instance, would be finding it riskier to lend to enterprises which don\u2019t have cash flow enough to service their previous debts.
\nIn such a case, any change in the BoM interest rate would only be of academic interest as far as stimulating demand for credit by the real sector (borrowing enterprises) of the economy is concerned.
\nDebtors who get the benefit of an interest reduction on existing debts will benefit due to lower debt servicing cost, where applicable. The adverse impact will however be real as far as depositors, who will receive a lower remuneration on their deposits, are concerned.
\nIt is not surprising therefore that the media release of the BoM, following last Monday\u2019s MPC, states in conclusion that it will pursue its efforts to implement a \u201cnew monetary policy framework\u2026 for an effective transmission (of monetary policy decisions) to the real sector\u201d. For the moment, transmission of the BoM\u2019s interest rate policy to the real sector is not that effective.<\/p>\n

For More News And Analysis About Mauritius<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Mauritius. GDP growth appears to be unaffected by changes in interest rates in the economy The Bank of Mauritius (BoM) stated on 20th February that its Monetary Policy Committee (MPC) of that day had decided to leave its key interest rate unchanged at 4%. It may be recalled that the Monetary Policy Committee […]<\/p>\n","protected":false},"author":84,"featured_media":18169,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6,8,16],"tags":[233,245,373,241],"class_list":["post-18170","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","category-homepage-english","category-twitter","tag-africa-press","tag-africa-press-mauritius","tag-bank","tag-mauritius"],"yoast_head":"\nThe Decision to Keep Repo Rate Unchanged - Mauritius<\/title>\n<meta name=\"description\" content=\"GDP growth appears to be unaffected by changes in interest rates in the economy The Bank of Mauritius (BoM) stat ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Decision to Keep Repo Rate Unchanged\" \/>\n<meta property=\"og:description\" content=\"GDP growth appears to be unaffected by changes in interest rates in the economy The Bank of Mauritius (BoM) stat ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2\" \/>\n<meta property=\"og:site_name\" content=\"Mauritius\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2022-07-16T09:31:50+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-07-16T11:12:34+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/mauritius\/sites\/61\/2022\/07\/postQueueImg_5-62d29d0b3be8b.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"388\" \/>\n\t<meta property=\"og:image:height\" content=\"291\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"The Decision to Keep Repo Rate Unchanged\",\"datePublished\":\"2022-07-16T09:31:50+00:00\",\"dateModified\":\"2022-07-16T11:12:34+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2\"},\"wordCount\":621,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/mauritius\/sites\/61\/2022\/07\/postQueueImg_5-62d29d0b3be8b.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-Mauritius\",\"Bank\",\"Mauritius\"],\"articleSection\":[\"all news\",\"files\",\"homepage-english\",\"twitter\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2\",\"url\":\"https:\/\/www.africa-press.net\/mauritius\/all-news\/the-decision-to-keep-repo-rate-unchanged-2\",\"name\":\"The Decision to Keep Repo Rate Unchanged - 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