Central Bank holds in January

On 19 January, the Monetary Policy Committee of the National Bank of Angola (BNA) held the key interest rate at 18.00% after a 100 basis point hike in November. Moreover, it left the standing liquidity absorption facility rate at 17.50% and the standing liquidity facility rate at 18.50%. However, the BNA raised its required reserve ratio to 20.0%.

At the tail end of 2023, price pressures intensified markedly: Inflation rose to a 17-month high of 20.0% in December, above the Bank’s revised end-2023 inflation forecast of 19.0%. The removal of fuel subsidies in June and a weaker kwanza in year-on-year terms—partly due to reduced Treasury and BNA interventions in the FX market in Q2—drove the inflation upturn. Against this backdrop, the Bank decided to maintain its currently-restrictive interest rates, but raised its required reserve ratio to mitigate price pressures by reducing liquidity in the economy.

In its communiqué, the BNA did not include explicit forward guidance. However, given the current inflationary environment, a majority of our panel is forecasting further hikes this year. The next monetary policy meeting is scheduled for 14–15 March 2024.

Analysts at the EIU commented on their outlook for the BNA’s key policy rate: “Angola's real short-term interest rate (a gauge of monetary policy tightness) is negative, which makes further rate rises necessary to contain inflation. Accordingly, we forecast that the policy rate will be raised by 200 basis points in 2024, to 20% at year-end.”

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