The central bank of Mauritius held its repo rate steady at 4.65 percent, with a majority of the bank's Monetary Policy Committee considering it "premature to tighten the current monetary policy stance given continued downside risks to the growth outlook and subdued inflationary pressures."
The Bank of Mauritius, which last cut its rate by 25 basis points in June 2013, also said the bank's staff had forecast inflation within a range of 3.9 to 4.1 percent by June before rising to a range of 3.9 percent to 4.3 percent by December, based on no rate changes.
Other members of the central bank's policy committee "considered it important to start the process of normalizing interest rates to enhance savings in the economy and address vulnerabilities in the banking and financial system due to a prolonged period of low interest rates," the bank said.
Minutes of the bank's meeting will first be released on May 12, but it is likely that the bank's governor, Rundheersing Bheenick, shared the minority view as he has frequently called for higher rates to meet the bank's year-end inflation target of 4.0 percent.
Inflation in Mauritius eased to 4.5 percent in March from 5.6 percent in February but up from 4.0 percent in December 2013, mainly reflecting fluctuations in fresh vegetable prices.
In February Bheenick told Reuters that monetary policy had fallen behind the curve and the import-dependent island in the Indian Ocean could expect greater external pressure on prices as inflation picks up in developed economies.
But Bheenick and two other committee members were outvoted at the last monetary meeting in February by external members of the committee that are appointed by the finance ministry. The policy committee comprises eight members, five of which are appointed by the ministry.
Bheenick, who has also called for more independence in forming the central bank's monetary policy committee, and Finance Minister Xavier Duval have publicly disagreed over whether to raise rates and the two met on Feb. 18 to discuss their differences.
Last week the International Monetary Fund said the Bank of Mauritius' current monetary stance was "broadly appropriate" but a withdrawal of accommodation might be necessary if inflationary pressures intensify. They also suggested that Mauritius should adopt a formal inflation targeting framework and that fiscal policy should be tightened this year to meet debt ratio targets.
Economic activity in Mauritius is project to pick up as the recovery in its export markets takes hold, notwithstanding a slowdown in the fourth quarter of 2013, the bank said.
The forecast for Gross Domestic Product growth has been maintained within a range of 3.7 to 4.0 percent for 2014, up from an estimated 3.2 percent growth in 2013, the bank said.
The IMF forecast 3.7 percent GDP growth this year.
"The MPC maintains strong vigilance in monitoring economic and financial developments and stands ready to meet in between its regular meeting, if the need arises," the bank said.
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