• Inflation within the West African Economic and Monetary Union (UEMOA) fell to a two-year low of 0.6% in May, bolstered by a decline in food costs.

• The Central Bank of West African States (BCEAO) cut its main interest rate by 25 basis points to 3.25% to maintain macroeconomic stability amid notable external uncertainties.

Annual inflation in the West African Economic and Monetary Union (WAEMU) has slowed to 0.6% in May 2025, according to the latest monthly report from the BCEAO. This drop reaches a two-year low, considerably beneath the central bank's target of 1 to 3%.

This decline is primarily attributable to a significant drop in food prices, which hold heavy weight in households' consumption baskets. Local grain production grew by 3% over the 2024/2025 agricultural season, aiding the easing of prices. At the same time, global prices for imported goods continued their downward trend: rice (-33.5%), wheat (-23.4%), sugar (-10.5%). A few products like cooking oils (+31.5%) and milk (+16.5%) still showed increases.

Underlying inflation, which excludes volatile components like food and energy, also slowed down to 0.7% in May from 1.0% a month earlier. This moderation reflects subdued domestic demand, particularly for consumer goods and household equipment.

In this context, the BCEAO decided on June 16 to cut its key interest rate by 25 basis points, bringing it down to 3.25%. This goal is to maintain macroeconomic stability, given ongoing strong external uncertainties.

However, the monetary easing trend had already begun before this decision. In May, the average interest rate in weekly auction operations moved from 4.87% to 4.74%, and trading volumes on the interbank market soared 18.7%, reaching 875 billion FCFA. These signals indicate improved liquidity among banks.

Another point noted is the continued dynamism in economic activity. The business climate index rose to 101.3 points, signifying corporate optimism. The revenue of merchant services grew by 8.7% and retail trade by 4.3% year on year. The only dark cloud on the horizon: the manufacturing industry, where growth slowed to 7.9% in May from 12.7% in April.

Given this configuration, the BCEAO will likely maintain a conservative stance in the coming months, balancing growth support with management of external pressures, particularly on exchange rates and global commodity prices.

This article was initially published in French by Fiacre E. Kakpo

Edited in English by Ola Schad Akinocho