Interest Rate Decision for MZ: November 2025 Analysis and Macro Outlook
The Central Bank of MZ cut its benchmark interest rate to 9.50% in November 2025, below market expectations of 9.75%. This marks the fourth consecutive rate reduction since May 2024, reflecting easing monetary policy amid slowing inflation and subdued growth. The move signals a cautious approach to support economic recovery while balancing inflation risks. Financial markets reacted with modest currency depreciation and yield adjustments. External geopolitical tensions and fiscal constraints remain key risks. Forward guidance suggests a base case of stable rates, with downside risks from global shocks and upside potential if inflation resurges.
Table of Contents
The Central Bank of MZ announced a reduction of the benchmark interest rate to 9.50% on November 14, 2025, down from 9.75% in September 2025. This decision marks a continuation of the easing cycle initiated in May 2024 when rates stood at 15.00%. The current rate is the lowest in over two years, reflecting a strategic shift to stimulate growth amid moderating inflation and external pressures.
Drivers this month
- Inflation slowed to 4.20% YoY in October 2025, down from 5.10% in August.
- GDP growth forecast revised down to 2.10% for 2025, from 2.80% earlier.
- Unemployment remains elevated at 9.30%, pressuring monetary easing.
Policy pulse
The 25 basis point cut places the policy rate below the 12-month average of 11.30%, signaling a dovish stance. The central bank aims to balance inflation targeting with growth support, maintaining a cautious approach given lingering fiscal deficits and external vulnerabilities.
Market lens
In the first hour post-announcement, the MZN currency depreciated 0.30% against the USD, while 2-year government bond yields fell by 10 basis points, reflecting market approval of the easing move but cautious sentiment on growth prospects.
Core macroeconomic indicators underpin the recent rate decision. Inflation has steadily declined from a peak of 8.70% YoY in early 2024 to 4.20% in October 2025. Meanwhile, GDP growth has slowed, with the latest quarterly data showing a 0.40% QoQ expansion, down from 0.70% in Q2 2025. The labor market remains weak, with unemployment steady near 9.30%, constraining consumer demand.
Monetary Policy & Financial Conditions
The central bank’s monetary policy rate now stands at 9.50%, down from 15.00% in May 2024. Financial conditions have eased, with lending rates dropping by 150 basis points on average since mid-2024. Credit growth has picked up modestly, rising 3.50% YoY in Q3 2025, supporting investment.
Fiscal Policy & Government Budget
Fiscal deficits remain a concern, with the government running a 4.80% of GDP deficit in FY2025. Public debt stands at 62% of GDP, limiting fiscal space. Recent budget adjustments aim to contain spending growth, but revenue shortfalls from subdued economic activity pose risks to fiscal sustainability.
External Shocks & Geopolitical Risks
Geopolitical tensions in the region have increased uncertainty, affecting trade and investment flows. Commodity price volatility, especially in energy and metals, has pressured the current account, which recorded a deficit of 3.20% of GDP in Q3 2025. These external shocks weigh on the central bank’s policy calculus.
Market lens
Immediate reaction: The MZN currency weakened 0.30% versus the USD, while 2-year government bond yields declined by 10 basis points, signaling market acceptance of the rate cut but cautious economic sentiment.
This chart highlights a clear easing cycle in MZ’s monetary policy, driven by falling inflation and slowing growth. The rate cut aligns with the central bank’s dual mandate to support recovery while anchoring inflation expectations. Market responses suggest confidence in the policy path but underline persistent external and fiscal risks.
Looking ahead, the central bank’s policy trajectory will hinge on inflation dynamics, growth signals, and external developments. We outline three scenarios for the next 12 months:
Bullish scenario (30% probability)
- Inflation remains subdued below 4%, allowing rates to stay near 9.50% or fall further to 9.00%.
- GDP growth accelerates above 3%, driven by improved investment and exports.
- Fiscal consolidation progresses, reducing deficits and stabilizing debt.
Base scenario (50% probability)
- Inflation stabilizes around 4.50%, with moderate growth near 2.00–2.50%.
- Monetary policy remains on hold, maintaining the current 9.50% rate.
- External shocks persist but are manageable, with cautious fiscal policy.
Bearish scenario (20% probability)
- Inflation rebounds above 6%, forcing rate hikes back toward 10.50%.
- Growth stalls or contracts due to geopolitical shocks or fiscal slippage.
- Currency weakness and capital outflows pressure financial stability.
Policy pulse
Given the current data, the central bank is likely to maintain a cautious easing bias, monitoring inflation closely. Any upside inflation surprises or fiscal slippages could prompt a pause or reversal.
The November 2025 interest rate decision for MZ reflects a pragmatic approach to balancing growth support with inflation control. The 25 basis point cut to 9.50% continues a steady easing trend that began in mid-2024. While inflation has moderated and growth remains subdued, external risks and fiscal constraints limit the scope for aggressive easing.
Financial markets have responded with modest currency depreciation and lower yields, signaling acceptance but also caution. The central bank’s forward guidance suggests a steady hand, with flexibility to adjust as new data emerges.
Investors and policymakers should watch inflation trends, fiscal developments, and geopolitical risks closely. The balance of risks remains tilted toward the downside, but a stable macro environment could pave the way for gradual recovery and sustained monetary accommodation.
Key Markets Likely to React to Interest Rate Decision
The interest rate decision in MZ typically influences local currency strength, bond yields, and equity market sentiment. Key tradable instruments to watch include the MZNUUSD currency pair, which tracks MZN against the USD and reacts to rate changes. The MZBANK stock index reflects banking sector sensitivity to interest rates. The MZMIN index tracks mining companies, sensitive to external shocks and currency moves. On the crypto side, MZDCBTC shows emerging market crypto adoption trends. Lastly, the MZEUEUR pair highlights regional currency dynamics linked to European trade.
Indicator vs. MZNUUSD Since 2020
Since 2020, the MZ benchmark interest rate and the MZNUUSD currency pair have shown a strong inverse correlation. Rate hikes from 15% to 9.50% have coincided with a 12% depreciation of MZN against USD, reflecting easing monetary conditions. This relationship underscores the sensitivity of the currency to policy shifts and inflation expectations.
FAQs
- What was the latest interest rate decision for MZ?
- The Central Bank of MZ cut the benchmark interest rate to 9.50% in November 2025, down from 9.75% in September 2025.
- How does the interest rate decision impact inflation and growth in MZ?
- The rate cut aims to support slowing growth while inflation has moderated to 4.20% YoY, balancing economic recovery with price stability.
- What are the main risks facing MZ’s monetary policy outlook?
- Key risks include geopolitical tensions, fiscal deficits, and potential inflation rebounds that could force tighter monetary policy.
Key takeaway: MZ’s latest rate cut to 9.50% signals continued easing amid moderating inflation and growth challenges, with cautious forward guidance balancing risks.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The November 2025 interest rate of 9.50% compares to 9.75% in September 2025 and a 12-month average of 11.30%. This steady decline reflects a clear easing trend over the past 18 months, with rates dropping nearly 5.50 percentage points since May 2024.
Inflation and GDP growth charts reveal a deceleration in price pressures and economic momentum. Inflation has trended downward from 8.70% in early 2024 to 4.20% most recently, while GDP growth has softened from 3.50% YoY to around 2.10% forecasted for 2025.