Country Tightens its Policy in the Face of Inflation

In an uncertain global context, the Bank of Mauritius has revised its forecasts and now predicts higher inflation than previously anticipated for 2026.

The Bank of Mauritius now anticipates average inflation of 5.5% in 2026. This new projection exceeds previous estimates and falls outside the target range set by the monetary authorities.

In response to this development, the Monetary Policy Committee raised the key interest rate by 25 basis points on Wednesday, May 20. The rate thus increased from 4.50% to 4.75%, a decision adopted unanimously in an international context deemed uncertain.

The Governor of the Central Bank, Priscilla Muthoora Thakoor, explains that this measure is primarily aimed at curbing inflationary pressures and preserving economic stability. She also points to the significant exposure of the Mauritian economy to external shocks, particularly the rise in oil prices, transport costs, and food imports.

Price developments remain under close scrutiny. Overall inflation held steady at 4.2% between March and April 2026, but the annual trend is rising, increasing from 2.7% to 3.6% in April. This increase stems primarily from rising energy costs, which in turn affect several everyday goods and services.

In its baseline scenario, the department has revised its forecasts and now projects average inflation of 5.5% for 2026, compared to 3.6% previously. The institution also warns of additional risks related to persistent tensions in the Middle East, which could disrupt the global oil market.

On the economic front, the growth outlook has declined. Real GDP is now expected to grow by 2.8% in 2026, compared to higher estimates at previous meetings. This revision reflects rising energy costs, a decline in purchasing power, and a slowdown in the tourism sector.