The Central Bank of Tunisia (BCT) said on Wednesday it had raised its key interest rate from 5.75 percent to 6.75 percent, the second hike in three months, to tackle inflation that has reached the highest level since 1990.
The bank’s last rate increase was in March, to 5.75 percent from 5.00 percent. Annual inflation hit 7.7 percent in May.
At its meeting Wednesday, the Executive Board of the Central Bank of Tunisia noted the persistence of these pressures which “are likely to intensify over the coming period, in the light of foreseeable developments in all the leading indicators of economic performance, in particular the expected rise in prices of basic materials, notably, energy.”
The continuation of inflationary pressures is “a threat to the recent economic recovery as well as to the purchasing power of citizens, and therefore requires taking appropriate preventive measures to reduce the negative effects and this, through the regulation of monetary policy through the interest rate instrument,” it explained.
The International Monetary Fund said last month that anchoring inflation expectations through additional rate increases would be crucial if price pressures did not moderate quickly.
Inflation is expected to reach to about 9 percent by the end of this year for the first time, officials have said.