Angola: Bank of Angola holds steady in March, despite high inflation
April 13, 2017
At its 31 March 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 beginning to fall from December’s peak, with the lagged effects of successive fuel subsidy cuts, the depreciation of the Angolan kwanza and loose monetary policy until the middle of last year finally working their way out of the system. With interest rates already at a multi-year high and the economy in a sorry state, any further rate hike would have depressed domestic demand and risked snuffing out the mild recovery expected this year. Likewise, with inflation still elevated, any relaxation of the Bank’s monetary stance could have stoked price pressures and frustrated the BNA’s aim of bringing inflation down to a more reasonable level.
The Bank’s communique was devoid of forward guidance, although with inflation expected to fall steadily going forward and the economy still weak, interest rates are unlikely to go much higher this year. Over the medium term, rates should fall as inflation is progressively reigned in.
The next monetary policy meeting is scheduled for 28 April 2017.
Author: Oliver Reynolds, Economist