December 19, 2017 / 2:38 PM / a year ago

UPDATE 1-Moroccan central bank keeps benchmark interest rate steady

(Adds details and background)

RABAT, Dec 19 (Reuters) - Morocco’s central bank kept its benchmark interest rate at 2.25 percent at a meeting on Tuesday, saying inflation was likely to rise but would remain moderate.

The bank, known as Bank al-Maghrib, said in a statement that inflation was expected to average 0.7 percent this year, down from 1.6 percent in 2016, and would average 1.5 percent in 2018 and 1.6 percent in 2019.

The bank has kept its main rate at 2.25 percent since March 2016.

It cut its economic growth forecasts slightly to 4.1 percent for 2017, from a previous estimate of 4.3 percent, and to 3 percent for 2018, from 3.1 percent, assuming a 7 million tonne cereal harvest.

Economic growth should rebound to 3.6 percent in 2019, the bank said in its statement.

It said it expects the budget deficit to reach 3.5 percent of GDP in 2017, before decreasing slightly to nearly 3 percent in 2018, in line with the government’s forecasts.

It forecast the current account deficit would ease from 4.4 percent of GDP in 2016, to 3.6 percent in 2017 and 3.3 percent in 2018, as exports and remittances from the 4.5 million Moroccans living abroad are expected to improve.

In June, Morocco delayed the first phase of liberalising the dirham currency, an IMF-backed reform to strengthen the North African kingdom’s economy, and the government has said it needs to study the liberalisation plan further.

Authorities plan to widen the dirham’s official trading band by 2.5 percent each way, from 0.6 percent, then fully remove the peg in a process that could take several years, depending on the market response. (Reporting by Zakia Abdennebi, writing by Aziz El Yaakoubi; Editing by Susan Fenton)

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