Press release of the BCT Executive Board meeting held on 23 May 2017

During its periodical meeting, held on 23 May 2017, the BCT Executive Board examined trends in the main economic and financial situation indicators and went over recent data regarding economic activity and transactions on the money market and the foreign exchange market, in addition to the situation of liquidity and the banking sector activity.

The Board highlighted the positive results of the preliminary statistics on the economic growth rate recorded over the first quarter of the current year (2.1% in annual shift against 0.7% a year earlier) and calls upon consolidating them in order to reach the targeted growth objective, in the wake of the major economic challenges and difficulties at the overall balances level faced up by the country.

In this financial context, the Board emphasized that the inflationary pressure which appeared over the previous months is on the rise, with an inflation rate of 5% at the end of April 2017 against 3.4% a year earlier, bearing in mind that the core inflation rate (excluding the prices of controlled and fresh products) posted 5.9%.

As for trends in bank liquidity, the Board pointed out that the trade deficit worsening in line with increasing State budget needs have exacerbated pressure on bank liquidity. This led the BCT to intensify its interventions to regulate the money market. The Bank has also strived for ensuring the minimum required balance between supply and demand on the foreign exchange market by raising available resources and using them to improve liquidity in order to limit the dinar’s foreign exchange rate recent fluctuations and resume the market’s stability gradually.

In light of what precedes, and in order to carry on with efforts to face up to growing pressure on both prices and external payments, and provide against its negative effects on the economic activity recovery which started up over the first quarter of the current year, and following deliberation, the Board decided to raise the Central Bank’s key interest rate by 25 base points, bringing it to 5%.