Friday, November 27, 2020

Angola keeps rate steady again, still sees 25% inflation

     Angola's central bank, one of the few banks to have maintained its interest rates this year, again left its basic rate steady and confirmed its forecast of 25 percent inflation this year along with its commitment to price stability.
     The Bank of Angola's (BNA) monetary policy committee left its BNA rate at 15.50 percent, unchanged since May 2019 when it was last cut in a continuation of an easing cycle that began in July 2018. Since then the rate has been cut 250 basis points.
     In addition to maintaining its key rate, the central bank also kept the interest rate on its other main rates steady, including the standing lending facility rate at 15.5 percent, the rate on its 7-day liquidity absorption facility at 7.0 percent and the overnight liquidity absorption rate at 0.0 percent.
     The coefficient on mandatory reserves in the national currency of was also kept at 22 percent while the coefficient on mandatory foreign currency reserves - which was raised 200 basis points in September to adjust liquidity levels to the inflation objective - was kept at 17.0 percent.
     After topping 41 percent in December 2016, Angola's inflation rate fell steadily to October 2019 but since then it has been steadily rising.
     In October this year inflation hit 24.34 percent, up from 17.95 percent in January and 23.8 in September.
     Reflecting the improvement in global investors' view of the prospects and returns of African countries, Angola's kwanza has been rising in recent weeks and was trading at 651.8 to the U.S. dollar today, up 2.5 percent from a record low of around 668.5 on Nov. 17. 
     However, it still remains down 21.3 percent since the start of this year.
     BNA said its reform of the supply side of the foreign exchange market is continuing, pointing out that some 61 percent of foreign exchange purchases from commercial banks in October came from their own customers.
    After Governor Jose Massano took over the reins at BNA in October 2017 - part of the new government's move to clean up Angola's image as corrupt - Massano began a major overhaul of the central bank in January 2018, including ditching a fixed exchange rate regime and using auctions to set a reference rate for the kwanza, a move that immediately led to a plunge in its exchange rate.
     In January this year BNA stopped purchasing foreign currency from oil companies and said they should instead sell directly to commercial banks, part of BNA's move to reduce its footprint in the foreign exchange market and normalize it by raising the number of participants.
    Angola's stock of gross international reserves eased to US$15.25 billion in October, down $139.83 million from September but still the equivalent of 11 month of imports of goods and services.



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