Angola: Bank of Angola eases stance slightly in May
May 30, 2017
At its 30 May monetary policy meeting, the National Bank of Angola (Banco Nacional de Angola, BNA) decided to keep the Basic Reference Rate on hold again at a record high of 16.00% and to leave the Marginal Lending Facility untouched at 20.00%. However, the BNA opted to reduce the Seven-Day Liquidity Absorption Facility by 200 basis points from 7.25% to 5.25%.
The BNA’s decision comes as inflation is finally declining after rising precipitously last year, with May’s figure marking the lowest rate in 11 months. This is a sure sign that the lagged effects of several fuel subsidy cuts, the depreciation of the kwanza and a loose monetary stance until the middle of last year are finally working their way out of the economy. As a result, the BNA felt it had more leeway to loosen monetary policy slightly without reawakening sky-high inflation. On the demand side, the economy continues to limp along, with firms remaining decidedly pessimistic in the first quarter of this year and oil prices still depressed. Reducing the Liquidity Absorption Facility should help boost credit growth and breathe more life into domestic demand, as many firms are currently reporting that weak access to financing is acting as an impediment.
The Bank’s communique contained no forward guidance, although the NBA is likely to continue gingerly loosening its stance over the coming year. Inflation is expected to fall going forward, but remain elevated, and the economy is still in a bad shape. However, the headline Basic Interest Rate looks set to remain elevated for some time to come, in order to ensure inflationary pressures remain under control.
The next monetary policy meeting is scheduled for 30 June 2017.
Author: Oliver Reynolds, Economist