Angola records highest inflation rate since 2017

Angola, a country grappling with soaring inflation rates, has been slow to implement the necessary monetary policy tightening measures, according to Fáusio Mussá, Chief Economist for Mozambique at Standard Bank. In a recent interview with CNBC Africa, Mussá discussed the recent monetary policy moves in Angola and the challenges the country is facing amidst high inflation rates. The Central Bank of Angola recently increased its policy rate by 50 basis points, bringing it to 19.5%. Despite this hike, Mussá believes that the monetary policy in Angola remains insufficiently tight given the country's inflation rate, which has climbed to 28.2%. Mussá suggests that further rate hikes are necessary to combat inflation effectively. He highlights the importance of government borrowing behavior in relation to money supply growth, emphasizing the need for tighter monetary policy to address inflationary pressures. Despite positive developments in foreign investments and fiscal surplus in Angola, inflation continues to pose challenges. Mussá anticipates a further policy rate hike in July, potentially reaching 20%. This could result in prolonged periods of real negative interest rates in Angola, affecting purchasing power and inflation rates. On the other hand, Mozambique is taking a different approach to monetary policy, with expectations of further easing. The Central Bank of Mozambique is anticipated to announce a 50 basis point rate cut in the upcoming Monetary Policy Committee meeting. Additionally, there may be adjustments to cash required reserves to stimulate credit growth. With inflation at a modest 3.3%, Mozambique aims to cautiously reduce real interest rates over the next few years. The country faces challenges such as delays in LNG investments, foreign exchange constraints, and fiscal pressures. Despite recent rate cuts, the central bank is expected to continue easing policy rates in the near term, with considerations for the upcoming general elections in October. Looking ahead, Mozambique is likely to maintain its accommodative monetary policy stance in the coming year.