Mauritius’ central bank lowered its key repo rate by 25bp to 4.4% in an effort to support domestic economic activity as inflation remains subdued, the bank said in a statement after its latest quarterly monetary policy meeting. The benchmark rate had stayed at 4.65% since June 2013.

The Bank of Mauritius cut its 2015 GDP growth forecast to 3.4% from 3.7% and said that private sector investment has yet to pick up, whereas the negative output gap would persist during 2016. Last month, Statistics Mauritius also revised down its 2015 GDP growth outlook - to 3.6% from 3.8%.

The Indian Ocean island's annual GDP growth slowed to 3.0% in the second quarter, its lowest level since Q1 2014, from 3.5% in the preceding three months, as the tourism and manufacturing sectors underperformed.

The Bank of Mauritius forecast the headline average annual inflation at around 1.6% in 2015, rising to around 3.0% in 2016. The y/y inflation rate, which is used to determine monetary policy, is projected at some 2.6% at end-2015 and 3.3% at end-2016, In July, the bank saw y/y inflation at 2.0% at end-2015 and 4.4% at end-2016.

Mauritius’ y/y inflation rate surged to a five-month high of 2.0% in September from 1.1% in August. The headline average annual inflation rate for the 12 months to end-September was 1.2%.

“The MPC is of the view that the rate of inflation is likely to remain subdued in the context of low commodity prices and low inflation in major trading partner countries. However, the MPC underlined that wage developments in excess of inflation and productivity gains pose upside risks to inflation,” the statement reads.