Towards a New Monetary Policy Regime in Mozambique

Abstract

We document the main features of the current monetary policy regime in Mozambique, describe ongoing structural policy changes, and analyze the main challenges facing the central bank in the process to modernize its monetary policy framework. The paper focuses on the needed reforms to successfully replace monetary aggregates by interest rate as the main instrument of monetary policy. Deepening the understanding of the monetary transmission, further building inflation forecasting capacity, strengthening the coordination between fiscal and monetary policies, enhancing communications and modernizing the legal framework to ensure central bank operational autonomy are essential to the success of the new monetary regime.