• Interbank volumes rose 18.7% in May, while rates declined across the market
• The BCEAO cut its main policy rate to 3.25% following a sharp drop in inflation
• Credit to the private sector increased by 11.5%, signaling renewed economic activity

The West African Monetary Union (WAEMU) is seeing clear signs of easing on its regional interbank market, just weeks after the Central Bank of West African States (BCEAO) announced a key rate cut in mid-June.

According to the BCEAO’s latest monthly bulletin, the average weekly volume of interbank operations in the Union jumped by 18.7% in May 2025 to CFA875 billion ($1.56 billion), up from CFA737.4 billion the previous month. At the same time, the average one-week interbank rate dropped to 5.34%, compared to 5.52% in April, reflecting renewed confidence among financial institutions.

This market easing came just before the BCEAO reduced its main policy rate from 3.50% to 3.25%, effective June 16. The decision followed a significant slowdown in inflation, which fell to 0.6% in May, well below the central bank’s target range of 1% to 3%. The rate cut also reflects the BCEAO’s aim to maintain macroeconomic stability amid ongoing global uncertainty.

Even before the rate adjustment, signs of loosening liquidity were visible. The average amount of BCEAO refinancing fell by 2.8% in May to CFA8,109 billion. The weighted average rate for weekly central bank auctions also declined from 4.87% to 4.74%, pointing to lower funding costs for banks.

In parallel, average lending rates applied by banks on loans eased slightly to 6.73%, while rates on term deposits remained stable at 5.35%. The easing liquidity environment is helping reduce borrowing costs, without significantly affecting savings returns for now.

The broader monetary conditions have also supported a recovery in credit, with private sector loan volumes up by 11.5% year-on-year, driven by business financing and medium-to-long-term loans.

WAEMU member states continue to raise significant funds from the regional debt market, with CFA5,599.4 billion in sovereign bonds issued by the end of May, a 2.8% increase compared to 2024. Short-term Treasury bills remain dominant, with issuance rising by 7.3%, while long-term bond issuance dipped slightly by 1.2%.

Despite looser monetary conditions, sovereign yields remain high, with six-month Treasury bill rates around 6.53% and five-year bond yields close to 7%. These elevated returns reflect ongoing investor caution over fiscal and geopolitical risks in the region.

With inflation under control and steady economic activity, merchant services grew 8.7%, while trade expanded by 4.3%, the BCEAO still has room to support the recovery. However, given global volatility, a cautious approach is expected for monetary policy in the second half of the year.