London, Sept. 19, 2025 (Lusa) - British consultancy firm, Oxford Economics, said on Friday that the cut in Angola's benchmark interest rate was "somewhat imprudent" if the aim is to control inflation, which is expected to exceed 20% this year.
"We expect the government to continue cutting fuel subsidies to help ease pressure on public finances, which means that rising fuel prices will continue to be a risk to inflation in the future; therefore, from an inflation target perspective, the rate cut was imprudent," said analyst Christian Franken.
Speaking to Lusa following the first cut in Angola's benchmark interest rate since 2023, the analyst from the African department of this British consultancy admitted that the decision "was a little surprising" because, while it is true that inflation has been slowing down, the rise in fuel prices "will exert upward pressure on prices (in general), which will slow down the disinflation process".
The National Bank of Angola (BNA) decided this week to reduce the three main interest rates by 0.5 percentage points, setting the base rate at 19%, the first decrease since 2023, believing in the downward trajectory of inflation.
The BNA decided to lower the base rate from 19.5% to 19%, the interest rate on the permanent liquidity facility from 20.5% to 20% and the interest rate on the permanent liquidity absorption facility from 17.5% to 17%, announced the bank's governor, Manuel Tiago Dias, at the end of the Monetary Policy Committee meeting.
"These decisions reflect the downward trend in inflation in Angola, in line with the inflation target for the current year, despite the uncertainty that still prevails at international level and its implications for the country's external accounts," he explained.
Manuel Tiago Dias pointed out that the monthly inflation rate slowed to 1.09% in August 2025, after a downturn in July, as a result of the decrease in the contribution of transport prices.
Oxford Economics, however, disagrees with the National Bank of Angola's forecasts: "We do not believe that inflation will decline as quickly as the central bank expects; in fact, we predict that inflation will average 20.8% in 2025 due to this slower disinflation, which is higher than the bank's target of 17.5%, meaning that interest rates may not be high enough to contain future inflation unless rates are raised again," said Christian Franken.
In statements to Lusa, the analyst who follows Angola at the Oxford Economics consultancy adds that the Angolan central bank "does not have an explicit inflation targeting framework, meaning that fighting inflation is not, strictly speaking, its sole directive, so it is likely that these interest rate cuts were made with the aim of stimulating the economy, which has been greatly affected by low global oil prices and falling demand for diamonds.
For Oxford Economics, "lower rates imply that there is a risk of higher inflation in the future unless rates are raised again."
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