Angola Monetary Policy September 2020

Angola: Central Bank maintains interest rate in September

At its 28 September meeting, the Monetary Policy Committee of the National Bank of Angola (BNA) maintained its basic reference rate at 15.50%, where it has been since 24 May 2019. However, the Bank increased its foreign exchange reserve requirement to 17.00% from 15.00%, in an attempt to cool down inflation. The move was likely also aimed at strengthening the kwanza, which has been on a steady depreciation path since mid-March.

The decision to stand pat came against a deteriorating global backdrop as new Covid-19 cases have risen in recent weeks, which will likely dent recent gains in economic activity. As such, the Committee noted that a cautionary stance is warranted regarding the revival of the economy. Turning to inflation, the Bank noted that price pressures have been running hot and opted to tighten the FX reserve requirement; hiking the reference rate itself could drag on activity and worsen the blow dealt by Covid-19 and associated containment measures. Moreover, any additional cuts would weigh on the already weak kwanza, which further limited the Bank’s room for maneuver.

Looking ahead, FocusEconomics panelists largely expect the Bank to stay put for the remainder of this year, although a deterioration in economic activity amid a further wave of infections could result in more easing. That said, panelists expect the BNA to lower the interest rate next year, likely in a bid to stimulate economic activity.

The next monetary policy meeting is scheduled for 27 November.

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