Bank of Mozambique kept policy rate steady at 17.25%

The monetary policy decisions taken by central banks in Angola and Mozambique have been the subject of recent discussions and analysis. Fáusio Mussá, Chief Economist at Standard Bank in Mozambique, provided insights into the divergent paths taken by these two Portuguese-speaking economies in a recent interview with CNBC Africa. The conversation delved into the recent 100 basis points increase in the monetary policy rate in Angola and the contrasting stance of the Central Bank of Mozambique in maintaining stability. The key themes that emerged from the discussion revolved around inflation pressures, currency depreciation, and the outlook for future monetary policy decisions in both countries. The impact of these decisions on economic growth and development was also a significant point of analysis. Let's delve deeper into the key points discussed in the interview: 1. Monetary Policy Decisions in Angola: Fáusio Mussá highlighted the necessity of the rate hike in Angola due to the significant depreciation of the Kwanzaa and rising inflation. The Central Bank of Angola's decision to increase the policy rate was aimed at anchoring inflation expectations and stabilizing the currency. However, the impact of the rate hike on the currency was more pronounced from a sentiment perspective than an immediate market reaction due to the weak monetary policy transmission mechanism. The forecast indicates that further rate hikes may be necessary to maintain positive real interest rates in the face of persistent inflationary pressures. 2. Economic Outlook in Mozambique: In contrast to Angola, Mozambique has experienced a more stable economic environment, with the Central Bank opting to keep the policy rate steady. Despite a notable decline in inflation rates, the Central Bank of Mozambique remains cautious due to fiscal pressures and accelerated credit growth in the personal segment. The forecast suggests that rate cuts are unlikely in the near term, with a projected timeline for potential easing in the third quarter of the following year. The discussion also touched upon the economic outlook for Mozambique, emphasizing the challenges of heavy reliance on LNG investments for growth acceleration and the potential benefits of renewable energy projects. 3. Long-Term Impacts and Challenges: Fáusio Mussá highlighted the dual nature of Mozambique's economic prospects, with LNG investments driving growth while creating dependency risks. The looming challenge lies in diversifying the economy beyond the resources sector to ensure sustained development and prosperity for the population. The interview underscored the need for prudent monetary policy decisions to navigate the complexities of economic growth fueled by extractive industries. As Mozambique prepares to unveil significant renewable energy projects and investments, the focus remains on translating these initiatives into tangible benefits for the broader population. In conclusion, the interview with Fáusio Mussá provided valuable insights into the contrasting monetary policy trajectories of Angola and Mozambique, shedding light on the challenges and opportunities faced by these economies. The nuanced analysis of inflation dynamics, currency stability, and economic diversification presents a comprehensive view of the evolving economic landscapes in these two African nations.