Angola: Central Bank cuts policy rate for the first time in four years in July
July 17, 2018
The Monetary Policy Committee (MPC) of the National Bank of Angola (Banco Nacional de Angola, BNA) slashed the key policy rate by 150 basis points from 18.0% to 16.5% at its meeting that concluded on 17 July. The decision marked the first time in four years that the benchmark borrowing costs were cut by the Central Bank and came as a surprise to market analysts, despite sustained easing of inflationary pressures in recent months.
Lower headline inflation drove the decision. Inflation moderated for the eighth consecutive month in June, to 20.2% in the province of Luanda—the lowest reading in nearly two and a half years. Extremely high inflationary pressures over the last two years had impeded the Bank from loosening its monetary policy stance, translating into challenging financing conditions. In turn, the Bank expects July’s rate cut to support a lower cost of credit on the back of falling interest rates on loans.
The Bank’s communiqué signaled that further easing of monetary policy cannot be ruled out over the coming quarters, especially considering early indications that suggest average inflation will come in below the Bank’s own forecast of 23.0% this year. Nevertheless, as inflationary pressures remain high and emerging market capital flight persists in the face of surging trade war fears and rising interest rates in the U.S., the BNA will continue to actively evaluate its monetary policy stance.
The next Monetary Policy Committee meeting is scheduled for 24 September.
Author: Almanas Stanapedis, Economist