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Economy

Capital Economics says recession motivates interest rate maintenance at 15.5 percent

The analyst at Capital Economics who follows Angola considered to Lusa that the National Bank of Angola (BNA) decided to maintain the interest rate due to the poor results of the economy, anticipating a rise this year.

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"The weakness of the recent figures on the evolution of Gross Domestic Product may have influenced the central bank's decision to keep the interest rate at 15.5 percent," John Ashbourne, who on Monday had predicted that the rate was going to rise to 16.5 percent.

The analyst stressed that "due to the large currency breaks" the consultant continues "to predict that inflation will increase this year and that the BNA will raise the interest rate".

On Monday, the BNA announced that it decided to keep the benchmark interest rate at 15.5 percent, and at the press conference that followed the Monetary Policy Committee meeting, José de Lima Massano stressed “the maintenance of the process disinflationary that allowed the achievement of the annual inflation target, despite the increase in the energy tariff, the introduction of VAT, the special consumption tax, as well as the exchange rate depreciation that occurred particularly in the last quarter of 2019 ”.

This Wednesday, the economic studies office of Banco de Fomento Angola (BFA) estimated that inflation would rise to 24 percent by the end of the year, from 16.9 percent in December.

As a result, the information note to which Lusa had access reads, monetary policy should remain restrictive, also serving to provide stability to the foreign exchange market.

"The BNA continues to maintain a delicate balance between exchange rate and monetary policy, and the current outlook for inflation in the coming months is negative, leaving no room for any relief," the note reads.

The document also adds that "the current tools are adequate to deal with liquidity management, with the BNA regulating the supply of liquidity to the market as it deems necessary for its normal functioning".

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