The MU central bank’s decision to maintain the policy rate at 4.50% marks a continuation of a cautious stance amid mixed economic signals. Since the last cut to 4.00% in September 2024, the rate has reverted to 4.50%, where it has remained stable through 2025. This stability reflects the central bank’s balancing act between containing inflationary pressures and supporting growth.

Drivers this month

• Inflation steady near 3.80% YoY, slightly above the 3.50% target.
• GDP growth moderating at 2.10% YoY, down from 2.80% six months ago.
• Labor market showing resilience with unemployment steady at 5.20%.

Policy pulse

The 4.50% rate sits just above the neutral rate estimate of 4.30%, signaling a mildly restrictive stance aimed at anchoring inflation expectations without derailing growth.

Market lens

Following the announcement, the MU currency (MUR) appreciated 0.30% against the USD within the first hour, reflecting market approval of policy consistency. Short-term government bond yields remained flat, while breakeven inflation rates held steady near 3.70%.

Core macroeconomic indicators provide essential context for the interest rate decision. Inflation, growth, employment, and external balances have all influenced the central bank’s stance.

Inflation trends

Consumer Price Index (CPI) inflation has hovered around 3.80% YoY in recent months, slightly above the 3.50% target band. Food and energy prices contributed 1.20 percentage points to overall inflation, while shelter costs added 0.40 points. This persistent inflationary pressure justifies the maintenance of a moderately tight monetary policy.

Growth and employment

Real GDP growth slowed to 2.10% YoY in Q3 2025, down from 2.80% in Q1. The labor market remains stable, with unemployment steady at 5.20%, indicating no immediate slack but also no overheating. Wage growth has moderated to 3.40% YoY, consistent with subdued inflation expectations.

External sector

The current account deficit widened slightly to 3.60% of GDP, pressured by higher import costs amid global commodity price volatility. Export volumes remain steady, supported by diversified trade partners. The central bank’s foreign reserves cover 5.20 months of imports, providing a buffer against external shocks.

Interest rate trajectory

Since the last cut in September 2024, the policy rate has oscillated between 4.00% and 4.50%, reflecting evolving economic conditions. The current plateau suggests a wait-and-see approach amid mixed signals.

Inflation vs. policy rate

Inflation’s YoY rate of 3.80% remains above the 3.50% target, while the policy rate at 4.50% provides a modest real interest rate cushion of approximately 0.70 percentage points.

Market lens

Immediate reaction: The MUR strengthened 0.30% against USD, reflecting confidence in policy consistency. Short-term yields and inflation expectations remained stable, indicating market acceptance of the status quo.

Looking ahead, the central bank faces a complex environment. Inflation remains sticky, growth is moderating, and external risks loom. We outline three scenarios for MU’s monetary policy trajectory over the next 12 months.

Bullish scenario (30% probability)

• Inflation falls below 3.00% by mid-2026 due to easing commodity prices.
• GDP growth rebounds to 3.00% YoY, driven by domestic demand.
• Central bank cuts rates by 50 basis points to 4.00% to support expansion.

Base scenario (50% probability)

• Inflation remains near 3.50–4.00% range, consistent with current trends.
• GDP growth stabilizes around 2.00% YoY.
• Policy rate remains at 4.50%, with potential minor adjustments.

Bearish scenario (20% probability)

• Inflation spikes above 4.50% due to external shocks or supply constraints.
• Growth slows below 1.50%, risking stagflation.
• Central bank hikes rates by 25–50 basis points to 4.75–5.00%.

Risks and considerations

External shocks such as commodity price volatility or geopolitical tensions could disrupt inflation and growth dynamics. Fiscal policy tightening or loosening will also influence monetary policy space. Structural trends like demographic shifts and productivity growth remain key long-run factors.

The MU central bank’s November 2025 Interest Rate Decision to hold at 4.50% reflects a prudent approach amid persistent inflation and slowing growth. The steady rate balances inflation control with growth support, while external and fiscal factors warrant close monitoring. Market reactions suggest confidence in policy consistency, but risks remain tilted toward inflation surprises or growth disappointments.

Structural trends such as labor market dynamics and productivity gains will shape the medium-term outlook. Policymakers must remain agile to navigate evolving conditions. Investors and businesses should prepare for a stable but cautious monetary environment in the near term.

Key Markets Likely to React to Interest Rate Decision

The MU interest rate decision typically influences currency, bond, and equity markets sensitive to domestic monetary policy shifts. The following tradable symbols historically track MU’s rate changes and macroeconomic conditions:

• MURUSD: The primary currency pair reflecting MU’s monetary policy impact on exchange rates.
• MUCO: A leading MU-based stock index sensitive to interest rate changes.
• MUROBTC: Cryptocurrency pair influenced by MU’s macroeconomic stability.
• MUBK: Major MU banking sector stock, responsive to interest rate shifts.
• EURMUR: Euro to MU currency pair, reflecting cross-border capital flows post-decision.

Indicator vs. MURUSD Since 2020: Insight Box

Since 2020, MU’s policy rate and the MURUSD exchange rate have shown a strong positive correlation. Periods of rate hikes correspond with MUR appreciation, while cuts align with depreciation. The 4.50% rate plateau since early 2025 has coincided with a stable MURUSD range, suggesting market confidence in the central bank’s inflation targeting. This relationship underscores the importance of monetary policy in shaping currency market dynamics.

FAQs

What is the significance of MU’s latest Interest Rate Decision?

The decision to hold rates at 4.50% signals the central bank’s cautious approach to balancing inflation control with growth support in a mixed economic environment.

How does the current interest rate compare historically?

The 4.50% rate matches the level seen since early 2025 and is above the 4.00% low in September 2024, reflecting a return to a moderately restrictive stance.

What are the key risks facing MU’s monetary policy?

Risks include inflation surprises from external shocks, slower-than-expected growth, and fiscal policy shifts that could constrain or expand monetary policy space.

Takeaway: MU’s steady 4.50% interest rate reflects a balanced policy amid persistent inflation and slowing growth, with markets signaling confidence but risks remaining.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.