Angola Monetary Policy May 2021

Angola: Central Bank maintains key interest rate in May

At its 28 May meeting, the Monetary Policy Committee of the National Bank of Angola opted to stand pat, leaving the basic reference rate at 15.50%, the interest rate of the permanent lending facility indexed to the treasury bills market at 0.50%, and the interest rate of the standing facility for the absorption of liquidity at 12.00%. However, the Bank increased the coefficient of the mandatory reserves in foreign currency from 17.00% to 22.00%.

The decision to keep the basic reference rate unchanged reflected the Bank’s assessment that its monetary policy stance has contributed to stability in the foreign exchange market, while supply-side shocks—particularly with regard to falling food supplies—have driven the recent uptick in inflation. As such, although the Committee did not explicitly state its opinion on stronger price pressures, it seemingly viewed them as transitory, and therefore did not see the need to hike the rate.

In the press release, the Bank did not provide explicit guidance regarding the future direction of monetary policy. However, the Bank once again omitted its statement from previous meetings on cooling inflation, despite its upwardly revised 2021 forecast, reducing the probability of monetary policy tightening ahead. That said, some panelists still expect the Bank to tighten its stance in a bid to bring inflation under control.

The next monetary policy meeting is scheduled for 29 July.

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