(Bloomberg) -- Morocco raised its benchmark interest rate to 3%, extending a rare monetary-tightening cycle to a record length to counter the fastest inflation in decades.

The widely expected 50 basis-points increase announced Tuesday was the third consecutive hike by Bank al-Maghrib, and the longest tightening streak since gaining independence over monetary policy in 2006.

Tackling a surge in consumer prices, which reached an annual 8.9% in January, is a top priority for Morocco. The bank said inflation is expected to remain at “high levels” over the medium term, averaging 5.5% in 2023. Its core component is seen at 6.2%, an upward revision of 2 percentage points compared with the December forecast.

The decision to hike rates was to “prevent the outbreak of self-sustaining inflationary spirals and to strengthen the anchoring of inflation expectations so as to favor its return to levels in line with the price-stability objective,” the institution said in a statement.

Morocco’s central bank is one of dozens around the world to raise rates to combat soaring consumer prices, partly sparked by the impact of Russia’s invasion of Ukraine on energy and food costs. There are some signs the cycle may be coming to an end, particularly after the collapse of three US banks and the rescue of Credit Suisse Group AG. 

All eyes are on the US Federal Reserve, which announces its latest interest-rate decision Wednesday.

“Despite a relative easing of external pressures, recent data show that inflation continues to accelerate, driven in particular by domestic supply shocks on certain food products,” the bank said. The committee “took note of the measures put in place by the government to improve the supply of these products and ensure the proper functioning of their markets” 

The bank said “significant increases” in worker remittances and travel receipts worked to limit the current-account deficit to 3.9% of GDP. It’s expected to ease to 2.8% in 2023 and 2.6% in 2024, thanks to the expected decline in energy prices and other factors. 

It also said that the fiscal deficit “should continue its downward trend,” mainly due to expected improvement in tax and non-tax revenue.

More From Central Bank

* GDP growth expected to rise to 2.6% in 2023 and 3.5% in 2024 after 1.2% rise in 2022

* Agriculture “is showing a relative recovery” after rainfalls; Grains harvest seen at below average 5.5 million tons

* Non-cereal crops to suffer from restrictions on irrigation and high cost of inputs


(Updates with details from the statement)

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