Angola’s central bank is prepared to cut interest rates further this year as inflation cools in the oil-producing African nation.
(Bloomberg) — Angola’s central bank is prepared to cut interest rates further this year as inflation cools in the oil-producing African nation.
The Banco Nacional de Angola reduced the benchmark rate to 17% from 18% in March, the second drop in 2023. Lowering borrowing costs makes Angola an outlier in Africa — it’s one of only two countries on the continent to reduce rates this year as countries from Nigeria to Morocco and Kenya battle to rein in inflation.
“We have room to keep on reducing interest rates without creating any situation where the inflation target will be missed,” Governor Jose de Lima Massano said in an interview Thursday in Washington, where he’s attending the International Monetary Fund’s Spring Meetings. If inflation slows further, “we will probably be ending the year with the basic interest rate around 15%,” he said.
Annual inflation in Angola, one of Africa’s top crude producers, eased for the 14th consecutive month in March to 10.8%. The central bank forecasts annual price-growth at 9% to 11% in December.
Massano said upside risks may come from a government plan to reduce or end fuel subsidies this year, climate change that’s affecting local food production — a key component in Angola’s consumer price index — and volatility in oil markets.
Higher crude prices have helped bolster Angolan exports and stabilize the value of the kwanza against the dollar, aiding the central bank’s efforts to reduce inflation.
“Oil prices are always critical,” said Massano, adding that Angola depends on oil for about 95% of its exports.
“We are also eager to see exactly what’s going to happen with fuel prices” once the subsidies are removed, he said. “I would say those are the critical issues at this point for us.”
The Angolan central bank’s monetary policy committee next meets on May 19.
–With assistance from Matthew Hill, Monique Vanek and Candido Mendes.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.