Angola Monetary Policy October 2019

Angola: Central Bank keeps key policy unchanged in October as inflation rises

At its 1 October meeting, the Monetary Policy Committee (MPC) of the National Bank of Angola (BNA) decided to keep the key policy rate stable at 15.50%. Similarly, the BNA also maintained the interest rate for the permanent liquidity-absorption facility at 0.00% and kept the coefficients of mandatory reserves in local currency unchanged at 16.00% and for foreign currency at 15.00%. The decision marked a second consecutive meeting where the Bank stayed put and came as a surprise to most market analysts who had expected a rate cut.

The Bank kept monetary policy on hold against the backdrop of intensifying price pressures. Inflation in the province of Lunda jumped to 17.9% in August, from 17.6% in July, marking a second consecutive month of increase. This was largely driven by fast-rising prices for housing, water, electricity and fuel, amid volatile global oil prices and a continued depreciation of the kwanza. On top of that, the NBA noted in the accompanying statement that the monetary base contracted 11.7% month-on-month in September, further supporting the decision to stay put.

Looking ahead, the Bank is still seen returning to policy easing later this year in order to prop up the faltering economy. That said, the NBA’s commitment to prudent monetary policy, which is reinforced by the country’s financing deal with the IMF, leaves the Bank with little space to maneuver if inflationary pressures fail to retreat.

The next Monetary Policy Committee meeting is scheduled for 28 November.

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