Angola Surprises With Rate Hold as It Sees Inflation Cooling
Angola’s central bank surprised financial markets by leaving borrowing costs unchanged on expectations that inflation will start to ease from August.
The monetary policy committee kept the key rate at 19.5%, Governor Manuel Tiago Dias said. The median estimate of four economists in a Bloomberg survey was for 75 basis-point increase, with all of them expecting it to hike.
“These decisions were motivated by the prospects of a slowdown in the rate of price growth in the economy, resulting from the relative improvement in the supply of essential consumer goods and the control of liquidity,” Tiago Dias said at a press conference in Menongue, a town about 600 miles south of Luanda.
Annual inflation in the net importer surged to a seven-year high of 31% in June fanned by the scaling back of fuel subsidies and a 6% depreciation in the kwanza against the dollar this year, making it the fifth worst-performing currency in Africa of those tracked by Bloomberg. Still, monthly inflation slowed to 2.07% in June from 2.49% in the previous month, the governor said.
The central bank maintained its inflation target of 23% for the end of the year as the current rate is “well above” this goal, said Tiago Dias. He added that from August onwards annual price growth is expected to slow down.
He attributed the weakness in the kwanza to strong demand for foreign currency. “The supply of foreign currency is still limited, but we also recognize that banks have been able to buy foreign currency for their customers” the governor said.
The Banco Nacional de Angola’s MPC is scheduled to meet again Sept. 19-20, Tiago Dias said.
