Tuesday, July 17, 2018

Angola cuts rate 150 bps as inflation continues to fall

      Angola's central bank lowered its benchmark BNA rate by 150 basis points to 16.50 percent and cut the ratio on mandatory reserves in kwanza by a further 100 points to 18 percent, citing a fall in inflation for the eight consecutive month and expectations that inflation would be lower than forecast.
      Today's easing follows the National Bank of Angola's (BNA) decision in May to unify the rate on its marginal lending facility with that of its basic interest, the BNA rate, and a 200 basis point cut in the ratio on mandatory reserves.
       Angola's inflation rate fell to 19.52 percent in June from 26.25 in October last year while the monetary base, the operational variable of monetary policy since last November, contracted by 7.75 percent in June and by 4.58 percent year-on-year.
       The BNA has forecast inflation of 23 percent this year and now expects the rate to be lower.
       BNA said gross international reserves in June had declined to US$17.50 billion in June from $18.98 billion in May and $18.06 billion in December 2017, equivalent to 7.3 months of imports.
       As part of major overhaul of its policy operations following the arrival of Jose Massano as BNA governor in October last year, the central bank in January replaced its fixed exchange rate regime with a floating regime with bands and set the reference rate for the kwanza via auctions.
       Since Jan. 9 the kwanza has depreciated steadily and was trading at 253.6 to the U.S. dollar today, down 34.5 percent since the currency began to float.

       The National Bank of Angola issued the following statement:

"The Monetary Policy Committee of the National Bank of Angola (CPM) met today, July 17, 2018, and decided to reduce the BNA Rate from 18% to 16.5%. The CPM also decided to maintain the interest rate of the Liquidity Absorption Permanent Facility unchanged and to reduce the ratio of Mandatory Reserves to deposits of the private sector, Central Government and Local Governments in national currency to 17%.

These decisions were made possible by the reduction of the annual national inflation rate for the eighth consecutive month, as well as the projections for the latter to be below the forecast for the year (23%). In addition, a trend is expected for the reduction of the interest rates of credit in the economy.
The IPCN (National Consumer Price Index), which includes all provinces, registered a monthly variation of 1.26% in June, lower than in the previous month (-0.01 pp) and a year-on-year change of 19 , 52% in the last 12 months (-0.32 pp). The provinces with the highest monthly variations were: Malanje (2.63%), Bengo (2.38%) and Moxico (1.92%), with provinces of Lunda Sul (0.77%), Namibe , 86%) and Cuando Cubango (0.86%) recorded the smallest variations. With regard to the general panorama of the IPCN by classes, it was verified that the highest monthly price variation was observed in the Clothing and Footwear class (1.99%).
The Monetary Base in National Currency, the operational variable of monetary policy, contracted 7.75% in June 2018 and 4.58% in year-on-year terms compared to June 2017.  
In the interbank money market, in June 2018, there was a reduction of 9.49% in the amounts traded, totaling a flow of KZ 752.64 billion. LUIBOR, at overnight maturity , stood at 21.27%, which represents an increase compared to its level at the beginning of the year (17.77%).
The monetary aggregate M2, which brings together all the bank deposits in national currency and the notes and coins held by the public, reduced during the month of June in Kz 58.55 billion. In fact, it increased from Kz 4,499.73 billion in May to K 4,441.18 billion in June 2018, corresponding to a decrease of 1.30%. In the last 12 months, this indicator varied positively by 1.88%.
In the credit market, there was a monthly expansion of 3.55% in National Currency Credit.
In the period under review, the National Bank of Angola sold a total of 1,389.91 million euros to commercial banks, with a cumulative sale of € 5,749.99 million this year. This amount is lower than the amount sold to commercial banks in the same period last year at 9.76%. It is also worth noting the conclusion of most of the foreign exchange operations pending in the banking system at 31 December 2017, with the exception of regularization situations according to a schedule agreed with the local entities involved.
The fall in exports to a greater extent than that of imports resulted in a balance of the goods account in the amount of USD 2.19 billion in June, lower than in May (USD 2.73 billion).
Gross International Reserves (IBR) in June 2018 stood at USD 17.50 billion against USD 18.98 billion in May 2018 and USD 18.06 billion in December 2017. end of the month under analysis, the level of international reserves represented 7.29 months of coverage of imports of goods and services.
The next meeting of the Monetary Policy Committee of the National Bank of Angola will be held on September 24, 2018 ."



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