Rate Cut To Have Negligible Impact on Growth And Inflation

The Central Bank of Tunisia (BCT)'s September 6 decision to cut its headline interest rate by 50bps to 3.5% will provide marginal benefits to the economy, and we highlight that the country's growth momentum will only accelerate once a stable government is in place. The move follows a decision in late June to cut interest rates by 50bps, from 4.5% to 4.0%, and comes at a time when inflation is relatively low, at 3.1% year-on-year (y-o-y). While lower interest rates will by no means hurt the economy, we expect the near- to medium-term benefits to be negligible in spurring growth as long as political stability remains in a state of flux.

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