Angola Monetary Policy January 2022

Angola: Central Bank stands pat in January

The Monetary Policy Committee of the National Bank of Angola (BNA) stood pat at its first meeting of the year on 28 January. As such, the basic reference rate remained at 20.00% and the standing liquidity lending facility at 25.00%. Moreover, the seven-day permanent absorption liquidity facility interest rate was left unchanged at 15.00% and the mandatory reserve ratio at 22.00%.

In deliberating its decision, the Bank noted that price pressures have been buoyed by higher energy prices and continued supply bottlenecks: factors that are effectively beyond the scope of monetary policy. Moreover, the Committee also noted that the country’s currency continued to appreciate against the U.S. dollar, which should have a positive impact on inflation. That said, the Bank projects inflation to average 18.0% in 2022, which is markedly above its medium-term objective of single-digit inflation. Turning to the economy, GDP returned to expansion in the third quarter of 2021 after nine consecutive months of declining output. The money supply and credit stock continued to grow through December, which should have supported activity in the fourth quarter.

Although the Bank gave no explicit guidance regarding the future direction of monetary policy, it emphasized markedly high inflation projections as necessitating the continuation of tight financial conditions. On the other hand, the frail economic recovery will likely need continued attention. As such, FocusEconomics panelists expect the Bank to commence an easing cycle this year to support the economy after a multi-year recession.

The next monetary policy meeting is scheduled for 28 March.

Analysts at the EIU, however, expect the Bank to continue standing pat, commenting:

“We expect the BNA to maintain the policy rate at 20% […] over the whole of 2022, considering high inflation averaging 16.3%. As inflation moderates over subsequent years, the BNA will have scope to ease policy. From 2023 we expect interest rate cuts to reflect softer price growth, with a policy rate of 13.5% by 2026 as inflation continues to retreat into single digits.”

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