Bank of Morocco: Declining Interest Rates Reflect Monetary Policy Easing and Stimulate Economic Financing
The Bank of Morocco reported that reductions in the main interest rate are gradually translating into lower interest rates applied to loans, indicating a positive impact on the cost of financing for individuals and businesses.
In its annual report on the economic, financial, and monetary situation for the year 2024, the central bank noted that interest rates on loans fell by an average of 35 basis points during the second half of the year, settling at 5.08 percent in the fourth quarter, compared to an annual average decline of 28 basis points.
Businesses Are the Biggest Beneficiaries of Interest Rate Cuts
The report indicated that the decline affected various customer categories, but non-financial businesses benefited more clearly, with interest rates for them decreasing by 30 basis points, compared to only 15 basis points for individuals.
In terms of loan purpose, the most significant reductions were observed in current account overdrafts and treasury advances (down 37 basis points), followed by consumer loans (down 19 basis points), and mortgage loans (down 12 basis points), while equipment loans saw a slight increase of 8 basis points.
Deposit Rates Also Decline
Regarding deposits, interest rates on 6-month term deposits decreased by 27 basis points to reach 2.33 percent, while rates on one-year term deposits fell by 5 basis points to 3 percent. The minimum interest rate applied to savings accounts dropped by 50 basis points, settling at 2.48 percent during the second half of 2024.
Bond Market Responds to Monetary Policy Easing
The reduction in interest rates was not limited to loans and deposits, as it also encompassed the treasury bond market. The report highlighted a decline in primary market prices starting in July, following the Bank of Morocco’s decision to lower the main interest rate, manifesting in shifts in interest rates across various maturities.
The decreases ranged from 41 basis points for 13-week bonds to 92 basis points for 15-year bonds, while the yield on two-year bonds fell by 72 basis points, five-year bonds by 82 basis points, and 30-year bonds by 60 basis points. The secondary market exhibited similar trends, with declines ranging from 34 to 90 basis points.
Gradual Reduction of the Main Interest Rate
The Bank of Morocco noted that, after four quarters of stability, it began to ease its monetary policy starting in June 2024, through a gradual reduction of the main interest rate by 25 basis points on two occasions, in June and December, ending the year at 2.50 percent.
Thus, the weighted average interest rate in the banking market stabilized around 2.75 percent during the second half of the year, before falling to 2.50 percent in the last two weeks of 2024, in line with the new accommodating directions of monetary policy.
