Angola: Bank of Angola continues to hold fire in April
May 14, 2017
At its 28 April monetary policy meeting, the National Bank of Angola (Banco Nacional de Angola, BNA) decided to keep the Basic Interest Rate on hold again at a record high of 16.00%. The Bank also left the Marginal Lending Facility untouched at 20.0% and kept the Seven-Day Liquidity Absorption Facility unaltered at 7.25%.
The BNA’s decision comes as inflation is finally dropping off from December’s peak, with April’s reading marking the fourth consecutive monthly fall, as the lagged effects of several fuel subsidy cuts, the depreciation of the Angolan kwanza and a loose monetary stance until the middle of last year are finally working their way out of the system. This makes it less imperative for the Bank to continue hiking rates to combat rising prices, especially as any change would take time to feed through. In addition, with interest rates already at a multi-year high and the economy flat on its back as a result of low global oil prices and moribund business confidence, any further rate rise would have risked dampening the meager recovery expected this year.
The Bank’s communique was devoid of forward guidance, although with inflation expected to fall steadily going forward while remaining elevated and the economy still weak, interest rates are unlikely to budge much this year. Over the medium term, rates should fall as inflation is progressively brought under control.
The next monetary policy meeting is scheduled for 30 May 2017.
Author: Oliver Reynolds, Economist