Angola: Central Bank cuts the key policy rate in January
At its meeting on 25 January, the Monetary Policy Committee (MPC) of the National Bank of Angola (Banco Nacional de Angola, BNA) lowered the key policy rate by 75 basis points to 15.75%. Meanwhile, the BNA left both the interest rate for the permanent liquidity-absorption facility and the coefficients of mandatory reserves unchanged. The decision came on the heels of two consecutive holds in the second half of last year and marks the beginning of what our panelists see as a gradual monetary easing cycle this year.
The Bank’s decision was driven by generally easing inflationary pressures throughout 2018. Despite picking up slightly at the end of the year (December: 18.2%; November: 17.8%), inflation in the province of Luanda was significantly lower in 2018 compared to the previous year, prompting the Bank to soften its policy stance. Meanwhile, the Bank’s move also reflected a shrinking monetary base as the money supply in national currency contracted 10.7% in annual terms in January.
Looking ahead, the key policy rate is expected to fall further this year, although only modestly against the backdrop of still-high inflation and the Central Bank’s commitment to maintain prudent monetary policy, reinforced by the country’s financing deal with the IMF.
The next Monetary Policy Committee meeting is scheduled for 28 March 2019.