Angola Monetary Policy May 2020

Angola: Central Bank keeps rates unchanged but boosts liquidity

The Monetary Policy Committee of the National Bank of Angola (BNA) moved forward its scheduled meeting by 20 days to 7 May. At the meeting, the Bank kept the basic reference rate at 15.50%. However, the Bank did activate the overnight lending facility of up to 100 billion kwanza and included large companies in the public securities discount facility with a limit of 100 billion kwanza; the facility was initially intended for SMEs only.

The decision came amid a deteriorating outlook for the Angolan economy and increasing price pressures. Inflation rose to an 18-monht high of 19.0% in March amid continued kwanza depreciation due to the oil price crash; as such, lowering the interest rate could have fueled greater depreciation and thereby stoked price pressures further. With limited room to cut rates, the steps taken to boost liquidity are aimed at supporting private-sector activity.

Looking ahead, although the Bank could come under greater pressure to ease its monetary policy stance given weak economic activity, currency depreciation and elevated price pressures will limit room for maneuver. As such, our panelists see the policy rate unchanged this year. Moreover, the BNA may need to intervene in the foreign exchange market to stem the kwanza’s depreciation.

The next monetary policy meeting is scheduled for 24 July.

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