Tunisie Numérique interviewed Mohamed Salah Souilem, former Director General of Monetary Policy at the Central Bank of Tunisia (BCT), to discuss the latest decision of the central bank, which decided, at its most recent Board of Directors meeting, to keep its policy rate unchanged at 7.00%, in a context marked by a retreat in inflation.
Mohamed Salah Souilem estimated that the current level of inflation was rather reassuring, while indicating that the central bank probably aimed to reduce it further, especially since the food component remained very high, above 10%.
He explained that Tunisians continued to refer to the perceived price level even with inflation at 4.8%, because they focused mainly on the most sensitive daily items, notably the prices of vegetables and fruits.
According to him, the dynamics enabling better inflation control came more from the prices of subsidized products, so-called “administered products,” which contributed to pulling inflation slightly downward.
He also noted a slight uptick in core inflation, stating that, in the latest INS communiqué, it had increased. He added that the central bank could not remain indifferent to this phenomenon, insofar as it sought, through its monetary policy, to act on the stable component of inflation, given that food and energy products largely escape its scope.
He indicated that, even if the central bank could be satisfied with the current level, it wished to have more certainty about total control of the phenomenon, recalling that the primary mission of central banks is to ensure price stability and preserve purchasing power.
He considered that, in the coming months, the central bank would seek to verify that inflationary pressures were totally under control before being able to assess forthcoming decisions. He stressed that the challenge around the policy rate—kept at 7%—lay in the fact that it remained above the inflation rate, which translated into a positive real interest rate of 2.2%, a situation that had not been observed for decades.
Finally, he estimated that the central bank wanted, at this stage, to maintain a positive real interest rate in order to preserve citizens’ purchasing power and to encourage household savings. He concluded that, in his view, the central bank had overall succeeded and that monetary policy displayed a certain coherence.
