The monetary policy committee (MPC) of Angola’s central bank previously increased the nation’s benchmark interest rate from 15.5 percent to a new high of 20 percent. The boost, which is part of the National Bank of Angola’s (NBA) effort to control inflation, comes as a surprise and is the first occasion the benchmark rate has been raised since November 2017.

Angola’s Growth is Threatened by Rising Inflation

As per Bloomberg, the MPC was forced to bring forward the meeting that eventually approved the rate rise forward owing to an “evolution of the major indicators.” As per NBA Governor Jose de Lima Massano, these factors constituted a danger to Angola’s economic trajectory. He elaborated:

The spread between inflation and the interest rate has been growing wider since the beginning of the year. Current data indicates additional inflationary pressures, which may put at risk the central bank’s inflation target of 19.5% for the end of the year.

Angola foreign currency rules | LEX Africa

The inflation in Angola has been rising since December 2019, according to statistics from the nation’s Instituto Nacional de Estatistica. For example, the inflation rate in December 2019 was 17 percent, but by March 2021 it had risen to 26 percent.

Exchange Rate Stability is a Problem for the National Bank

Angola’s year-on-year growth rate was just above the 26% level in December 2017, according to the statistics. The data suggest that unless the NBA gets involved, Angola’s inflation rate would likely keep rising, perhaps reaching a high of 40% in December 2016.

Angola Hikes Benchmark Interest Rate as Central Bank Attempts to Tame Rising Inflation

Nevertheless, Tiago Dionisio, an analyst at the Lisbon-based Eaglestone Advisory SA, is quoted in the Bloomberg story as saying that while the move would have an influence on the economy, the NBA is more concerned about the local kwanza currency. He stated:

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

Meanwhile, the study points out that these amendments must still be declared before becoming law.

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