Angola's central bank lowered its benchmark BNA rate by 75 basis points to 15.75 percent, saying the cut was supported by the decline in inflation during 2018 and a 10.71 percent contraction in the monetary base, the bank's operational variable, in the last 12 months.
It is the National Bank of Angola's (BNA) second rate cut since July 2018, bringing the total reduction to 225 basis points in this easing cycle.
BNA Governor Jose Massano has been overhauling the central bank since he took over in October 2017 and his first move the following month was to raise the BNA rate 200 basis points to 18.0 percent to reinforce his commitment to tackling inflation.
Angola's inflation rate began accelerating in early 2015 and rose steadily before hitting 41.12 percent in December 2016. Although inflation then eased in in the first half of 2017, it rose again in October, the month Massano took over from his predecessor, Walter Filipe da Silva.
The appointment of Massano as BNA Governor was part of President Joao Laurenco's move to clean up Angola's image as a corrupt nation. Laurenco took over as president in September 2017 from Jose Eduardo dos Santos, who had been in power for 38 years.
In addition to the rate hike in November 2017, Massano has carried out a plethora of policy changes at the BNA, including adopting the monetary base as an operational variable for monetary policy to better control liquidity, replacing the fixed exchange rate regime with a floating regime with bands, conducting auctions to set a reference rate for the kwanza, lowering and changing the basis for banks' mandatory reserves, and unifying the rate on the marginal lending facility with that of the bank's basic interest rate.
Most recently, BNA earlier this month revoked the banking licenses of two banks after they failed to raise their capital to meet new minimum levels. Local media reported that both institutions had ties to the sons of the former president.
Throughout 2018 Angola's inflation rate has decelerated steadily from 22.72 percent in January although it rose in December to 18.6 percent from 18.36 in November.
In today's statement, BNA's monetary policy committee said the stock of credit in kwanza rose 0.50 percent in December from November for annual growth of 20.16 percent while gross international reserves declined to US$16.16 billion in December 2018 from $18.23 billion in December 2017, enough to finance 6.8 months of imports.
After depreciating steadily following BNA's switch to a floating exchange rate regime, the kwanza has stabilized in recent months and was trading at 310.8 to the U.S. dollar today, down 0.7 percent this year.
BNA said it would maintain the rate on its permanent liquidity absorption facility at 0 percent along with the mandatory reserve ratio in kwanza at 17.0 percent and the ratio for foreign currency deposits at 15.0 percent.
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