Angola raises benchmark interest rate as central bank tries to tame rising inflation – Finance Bitcoin News

The Monetary Policy Committee (MPC) of the Angolan Central Bank recently raised the country’s key interest rate from 15.5% to a record high of 20%. The largely unexpected hike, which is one of the National Bank of Angola’s (NBA) attempts to contain inflation, is the first rate hike since November 2017.

Rising inflation is a threat to Angola’s growth

According to a Bloomberg report, a “development in key indicators” forced the MPC to bring forward the meeting that ultimately approved the rate hike. These indicators posed a threat to Angola’s growth trajectory, according to NBA Governor Jose de Lima Massano. He stated:

The spread between inflation and the interest rate has been widening since the beginning of the year. Recent data suggests additional inflationary pressures that could jeopardize the central bank’s inflation target of 19.5% year-end.

As data from the Instituto Nacional de Estatistica in Angola shows, the country’s inflation has been on an upward trend year-on-year since December 2019. The inflation rate was 17% in December 2019, but was over 26% in March 2021.

The central bank’s concerns about exchange rate stability

As the data also show, Angola’s year after year only exceeded the 26% threshold in December 2017. The data seems to suggest that Angola’s inflation rate is likely to continue to rise and potentially hit December 2016 if the NBA doesn’t act high of 40%.

Meanwhile, the Bloomberg report cited Tiago Dionisio, an analyst with Lisbon-based Eaglestone Advisory SA, who said that while the decision will have an economic impact, the NBA is more concerned about the stability of the local Kwanza currency. He said:

(The decision) shows that the central bank is more concerned about the current course of inflation and maintaining the exchange rate stability of the kwanza.

Meanwhile, the report notes that these changes still need to be published before they go into effect.

Are Rate Hikes the Best Way to Tame Inflation in Emerging Markets? Let us know what you think in the comments section below.

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