Angola central bank delivers 2023’s biggest rate cut to date

Bloomberg

Angola’s central bank carried out the world’s biggest interest rate cut so far this year as it forecasts inflation to slow further.
The policy committee dropped the rate to 18% from 19.5%, Governor Jose de Lima Massano told reporters in Luanda, the capital. That’s the steepest cut since July 2018.
“This decision was based on the reduction of inflation observed throughout 2022” and because certain price pressures have eased,
Massano said. It also reflects an“alignment” of the
monetary conditions with
our medium-to-long-term
inflation targets, he said.
While the central bank of Belarus also cut rates earlier this week, most central banks that have announced rate decisions in 2023 have either hiked or left borrowing costs unchanged, extending the world’s most aggres- -sive and synchronised monetary policy tightening in more than 40 years in
response to inflation shocks.
Annual inflation in Africa’s third-largest oil producer has been easing since February, ending 2022 at 13.9%. That gave Angola the second-highest positive real interest rate of 57 nations and the eurozone tracked by Bloomberg. Inflation also beat the MPC’s revised 16% year-end target.
The central bank now forecasts inflation to end the year at between 9% to 11%. Massano said there was room for interest rates to fall further this year if consumer prices continue to ease in the African nation.
“If the current situation remains unchanged, we are in a position to continue on this path,” said Massano.
An appreciation in the value of the kwanza against the dollar last year — largely because of higher oil prices — has helped keep a lid on Angolan consumer prices. The currency gained 9%, making it one of the world’s best performers.
The rate cut may help boost much-needed economic growth. The International Monetary Fund forecasts the economy will expand 3.4% in 2023, after exiting a five-year recession in 2021.