Congo cuts rate 4th time as inflation seen easing

      The central bank of the Democratic Republic of Congo cut its benchmark interest rate for the fourth time in 10 months, saying this should strengthen the financing of the country's economy in Congolese francs and thus support the de-dollarization of the economy amid a greater control of inflation.
      The Central Bank of Congo (BCC) cut its key interest rate by 1 percentage point to 7.50 percent and has now cut it 11 percentage points after embarking on an easing cycle in March 2021 and following this up with rate cuts in April and June.

      Including the latest rate cut, BCC has now completely unwound an 11 percentage point rate hike in August 2020 that was aimed at anchoring inflation expectations after the Congolese franc plunged, pushing up import prices and inflation, due to the collapse in global demand for raw materials and metals during the crises-phase of the COVID-19 pandemic.

      Congo is Africa's largest copper producer and the world's leading miner of cobalt, used in batteries.

      The latest rate cut was decided at meeting of the bank's monetary policy committee (CPM) on Dec. 30, 2021 and announced on the bank's website in a statement dated Jan. 2, 2022.

      In addition to the rate cut, CPM said banks' mandatory reserves should be in local currency from now.

      "2021 was marked by a stability in the macroeconomic framework," BCC said, adding this was a reflection a good coordination of monetary and budgetary policies.

       Based on the latest estimates, BCC estimated economic growth in 2021 of 5.7 percent, up from 2020's 1.7 percent, and forecast growth this year of 6.1 percent.

       BCC estimated inflation in Congo in 2021 of 5.1 percent in 2021, saying this reflected the relatively stable exchange rate, and inflation of around 5.0 percent in 2022.

       The Congolese franc fell sharply in May 2020 in response to the pandemic, and continued its sharp fall until BCC's rate hike in August, which came the month after the current governor, Malunga Kabuki Mbuyi, was appointed as the country's first female governor.

      After the sharp rate hike, the franc stabilized but ended the year down some 14 percent against the U.S. dollar.

       In 2021 the franc mainly moved sideways against the dollar, but below the 2,000 level, to end the year 0.9 percent below its level at the start of the year.

      So far this year the franc has strengthened marginally and was trading at 1,991.4 to the U.S. dollar today, up from 1,993.1 at the start of the year.

     "The CPM stressed that the outlook for 2022 is good for the Congolese economy," BCC said, adding the forecast for growth and inflation was based on the "rigorous implementation of sound economic policies" begun in 2021, particularly a respect of the stability pact between the central bank and the finance ministry, the "meticulous: execution of structural reforms, and alignment of monetary and budgetary policies.

     www.CentralBankNews.info

     

     

Congo cuts rate 2nd time, inflation slows, franc stable

     The central bank of the Democratic Republic of Congo lowered its monetary policy rate for the second consecutive month, saying it was easing funding conditions in light of a slowdown in inflation, a stable foreign exchange market and favorable prospects for the short term that don't point to any major shocks.

     The Central Bank of Congo (BCC) cut its policy rate by another 500 basis points to 10.5 percent, according to a statement from the bank's monetary policy committee published on twitter by an advisor to the bank's governor.

      BCC has now cut its key interest rate by 800 basis points this year following a 300 point cut on March 12.

     The two rate cuts partly reverse a sharp 1,100 basis point rate hike in August last year aimed at re-anchoring inflation expectations after the Congolese franc plunged, pushing up import prices and inflation, due to falling global demand for metals and raw materials amid the COVID-19 pandemic.

     Prior to the August hike, which came at an unscheduled meeting of the bank's policy committee, the rate had been cut by 150 basis points in March to 7.50 percent to cushion the country's economy from the impact of the pandemic.

     In early March last year the franc began to weaken and then fell sharply - some 12 percent against the U.S. dollar - from early May to early August. 

     Since then the franc has stabilized but still bounced off lows around 2,000 to the dollar last month and was trading at 1,972 to the U.S. dollar today, down 14 percent this year.

     The central bank said the foreign exchange market was stable with the franc depreciating 0.1 percent in the last month. 

     After jumping to 31.42 percent in July 2020 from 7.54 percent at the start of 2020, inflation in Congo has fallen rapidly to 6.23 percent in January this year from 22.02 percent in November last year.

     Despite the hit to global economic activity from the pandemic, Congo's economy expanded by 1.7 percent last year, BCC said, due to a rebound in the demand for its main exports, copper and cobalt.

      Surveys of business leaders show rising confidence about the economy in the short run and the International Monetary Fund forecasts 3.8 percent growth this year and inflation of 10.9 percent.

     www.CentralBankNews.info

Congo cuts rate 600 bps as inflation falls, growth strong

      The central bank of the Democratic Republic of Congo (DRC) cut its monetary policy rate by 600 basis points to 14.0 percent "in view of the good economic situation, both internationally and nationally, favourable macroeconomic prospects and the absence of imminent risks."
      It is the first rate cut by the Central Bank of Congo (BCC) since November 2013 and the first change in rates since June 2017 when the rate was raised to 20 percent from 14 percent.
      BCC said in a statement from April 10 that domestic prices had continued to decelerate in March, with the inflation rate down to 50.41 percent from 52.74 percent at the end of February, BCC said.
       Data shows Congo's headline inflation eased for the sixth consecutive month in February to 48.85 percent in February from a 2017 high of 70.75 percent in August.
       Continuing this declining trend, the central bank forecast inflation should end this year at 12.34 percent compared with an optimal target of 7.0 percent.
       Congo, previously known as Zaire,  is Africa's largest copper exporter and depends on raw materials for 95 percent of export revenue.
       It's economy is benefitting from global demand and rising prices of raw materials, such as gold, diamonds, copper and cobalt, with economic growth this year seen accelerating to 4.3 percent from 3.7 percent last year and 2.4 percent in 2016, BCC said.
       The 2018 forecast is down from the central banks' forecast last month of 5.2 percent.
       Congo's foreign exchange reserves are rising on the back of higher exports and BCC said they had now reached US$1 billion, enough for 4 weeks and 2 days of imports, up from $810 million in December.
       BCC said copper prices had stabilized around US$6,810 per tonne, while cobalt prices were continuing to rise exponentially to $87,221.55 per tonne in March, a monthly rise of 4.08 percent.
       And this month prices have already reached $95,000, the central bank added.
       Strong economic growth is supporting the exchange rate of Congo's franc, which plunged between November 2016 and August 2017.
       But since September last year the franc has been more stable and in the first three months of this year it depreciated by 1.49 percent compared with depreciation of 11.27 percent in the same 2017 period, the central bank said.
        Barring any shocks, the BCC forecast the franc would depreciate by 9.09 percent by the end of 2018 compared with depreciation of 23.65 percent in 2017.
        Today the franc was quoted at 1,570.5 to the U.S. dollar, unchanged since the start of 2018.

       www.CentralBankNews.info