• The BCEAO cut its main policy rate by 25 basis points to 3.00%, effective March 16.

• Inflation fell to -0.8% in the fourth quarter of 2025 after -1.4% in the previous quarter.

• The WAEMU economy grew by 6.7% in 2025, and the central bank projects 6.4% growth in 2026.

The Central Bank of West African States (BCEAO) announced on March 4, that it reduced its key policy rates by 25 basis points. The decision will take effect on Monday, March 16, and the bank aims to strengthen access to financing across the West African Economic Monetary Union (WAEMU) zone.

Following its regular meeting in Dakar, the Monetary Policy Committee lowered the main refinancing rate from 3.25% to 3.00% and reduced the marginal lending facility rate from 5.25% to 5.00%. The committee maintained the reserve requirement ratio at 3.0%.

“The reduction in key interest rates should help consolidate the easing of financing conditions for economic activity within WAEMU,” the central bank said in a statement signed by its governor, Jean-Claude Kassi Brou.

Inflation in Negative Territory

The decision forms part of a monetary normalization cycle that contrasts sharply with previous years. The BCEAO began raising rates in June 2022 after inflation peaked at 8.4% in October 2022 due to global energy price surges and the economic fallout from the war in Ukraine. The bank raised its main rate to 3.00% in March 2023, marking a fourth consecutive increase since June 2022.

The bank later lifted the rate to a peak of 3.50% in December 2023 and maintained that level throughout 2024. Inflation reached 4.1% in the second quarter of 2024, exceeding the bank’s 1% to 3% target range, driven by a disappointing agricultural campaign, supply disruptions linked to insecurity in the Sahel, and higher imported food prices.

The policy pivot began in June 2025, when the BCEAO cut its main rate from 3.50% to 3.25% as inflation fell to 2.3% in the first quarter of 2025. The March 2026 decision marks the second step in this easing cycle and returns rates to their March 2023 level.

The new cut comes amid unprecedented deflation in the Union. Inflation reached -0.8% in the fourth quarter of 2025 after -1.4% in the previous quarter, driven by lower food prices supported by strong domestic harvests and declining import costs.

For the full year 2025, inflation stood at zero. The BCEAO expects inflation to rebound gradually to 1.4% in 2026 but warned that global geopolitical tensions could push prices higher.

Robust Growth Driven by Agriculture and Extractive Industries

The WAEMU economy grew by 6.7% in 2025, up from 6.2% in 2024. Strong agricultural output, services activity, and performance in extractive and manufacturing industries supported growth. These results positioned WAEMU among the fastest-growing regions globally at a time when advanced economies struggled to regain momentum. By comparison, the European Central Bank maintained its main refinancing rate at 2.15% in March 2026 while pursuing a cautious approach toward eurozone inflation.

For 2026, the BCEAO forecasts real GDP growth of 6.4%, supported by solid domestic demand and resilient agricultural and mining production.

Credit to the economy increased by 5.6% in 2025 compared with 4.5% in the previous year, reflecting improved but moderate financing dynamics.

Marked Improvement in External Trade

The Union’s trade balance improved due to higher gold and oil exports and lower food and energy import bills. Member states also mobilized additional external resources, reinforcing the trend. During its September 2025 meeting, the Monetary Policy Committee had already highlighted the improvement in the overall external balance while pointing to persistent risks, including insecurity in the Sahel, climate shocks, and geopolitical tensions.

However, the momentum weakened toward the end of the year as cocoa prices fell 43.9% year-on-year in December 2025, rubber prices dropped 23.5%, and coffee prices declined 19.3%, penalizing producing countries.

The committee said it “will continue to pay close attention to risks affecting price developments” and reserved the option to take “appropriate measures” to safeguard monetary and financial stability within the Union.

Fiacre E. Kakpo