Fri. Apr 19th, 2024

(Bloomberg) — Angola’s central bank raised its key interest rate to the highest level in 15 months to rein in stubborn inflation.

The monetary policy committee increased the rate to 19% from 18%, Governor Manuel Tiago Dias said. The hike was the second under Tiago Dias, who held the rate at the previous meeting he presided over.

“The increase in the interest rate is justified by the persistence of inflationary pressures in the economy,” Tiago Dias said at a press conference in Bengo, a province about 37 miles (60 kilometers) north of the capital Luanda. 

The decision signals the central bank’s determination to tighten monetary policy to prevent the rate of inflation from drifting upwards, in contrast to other emerging markets in Europe and Latin America, which are cutting borrowing costs as price growth is easing. 

The yield on Angola’s 2032 eurobonds rose one basis point to 10.68% by 4:17 p.m. in Luanda.

Angola’s Finance Minister Vera Daves de Sousa said on Tuesday that the country remains committed to phasing out fuel subsidies, which could add to price pressures. 

The annual inflation rate in the net importer climbed to a 21-month high of 24% in February from 21.99% the previous month. The central bank still expects it to slow to about 19% by the end of 2024, said Tiago Dias. 

Local Production

Inflationary pressures in the southwestern African nation mounted last year after the Angolan treasury briefly abstained from dollar sales. The move triggered a sharp depreciation of the kwanza, which has lost about 40% of its value against the dollar over the past 12 months, according to data compiled by Bloomberg.

“There is a gap between the demand and supply of goods and services available in Angola,” said Tiago Dias. “Local production is still insufficient and the deficit in terms of supply hasn’t been covered by the import of goods.”

The governor said the kwanza has since stabilized against the dollar and ruled out any plans to intervene in the foreign exchange market to bolster the local currency.  

The Banco Nacional de Angola’s MPC is scheduled to meet again on May 16-17 in Luanda, the governor said.

–With assistance from Robert Brand.

By Joy

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