Angola: Bank of Angola stays put in August
September 11, 2017
At its 31 August 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%. In addition, the BNA opted to leave the Seven-Day Liquidity Absorption Facility unchanged at 2.75%, after lowering the rate by 50 basis points in the previous month.
The BNA’s decision comes as inflation continues its descent, with August’s figure marking the eighth consecutive monthly decline in inflation. The effects of fuel subsidy cuts, the substantially weaker kwanza and low interest rates until the middle of 2016 are ebbing, and the tighter monetary policy adopted over the last 12 months by the Central Bank is dampening price pressures. However, despite limited demand-push pressures–the economic climate indicator remained mired in negative territory in Q2– inflation remains elevated and is taking time to decline, as inflation expectations remain high. As a result, any loosening of monetary policy could have risked reversing inflation’s downward trend.
The Bank’s communique contained no forward guidance, although with inflation set to remain elevated, due in part to second round effects associated with poorly anchored expectations, the BNA is unlikely to be able to substantially lower its Basic Reference Rate in the near term. However, as price pressures continue to ease, 2018 should see a slight reduction in the Basic Reference Rate.
The next monetary policy meeting is scheduled for 29 September 2017.
Author: Oliver Reynolds, Economist