Angola: Bank of Angola loosens stance again in June
July 12, 2017
At its 30 June 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 for the second meeting running by 200 basis points from 5.25% to 3.25%.
The BNA’s decision comes as inflation is finally dipping after rising alarmingly last year, with May’s figure marking the fifth consecutive monthly decline in inflation. The effects of fuel subsidy cuts, the substantially weaker kwanza and low interest rates until the middle of 2016 have now fed through to prices, and the tighter stance adopted by the Bank over the last 12 months is bearing fruit. As a result, the BNA felt it had more wiggle room to loosen monetary policy slightly without altering the downward trajectory of inflation. On the demand side, the economy continues to hobble along, with firms remaining decidedly pessimistic in the first quarter of this year and oil prices still low. Reducing the Liquidity Absorption Facility should help boost credit growth, which was virtually flat in May, and give domestic demand a welcome shot in the arm; in Q1 many companies highlighted restricted access to finance as a key factor holding them back.
The Bank’s communique contained no forward guidance, although with inflation set to remain high due in part to second round effects associated with poorly anchored expectations, the headline Basic Interest Rate should remain elevated for some time to come in order to ensure inflationary pressures remain in check.
The next monetary policy meeting is scheduled for 31 July 2017.
Author: Oliver Reynolds, Economist