By Sergio Goncalves
(Reuters) -Angola’s central bank kept its main interest rate unchanged at 17% on Friday, citing a sharp depreciation of the local kwanza currency that is stoking inflationary pressure.
The kwanza is one of the worst-performing African currencies this year as low oil prices and an increase in debt payments have made it harder for the central bank to prop it up.
It was trading at 831.5 per U.S. dollar on Friday, Refinitiv data showed, sharply weaker than the 506 to the dollar level it traded at two months ago and the 502-506 kwanza range it had been trading in since November 2022.
“The exchange rate, due to the substantial reduction in cash available in foreign currency, has already adjusted,” central bank governor Manuel Tiago Dias told a news conference, adding that the Bank of Angola could still take measures to avoid strong fluctuations.
He added that inflation was also being driven higher by a government decision to lower a fuel subsidy, which has led to a steep increase in gasoline prices.
The southern African country’s inflation accelerated to 11.25% year-on-year in June from 10.62% in May and 10.59% in April.
Dias said on Friday that the central bank now saw inflation ending the year at 12%-14%, up from an earlier forecast of 9%-11%.
“This revision does not compromise the medium-term objective to reach a single-digit inflation rate,” the governor said.
At its previous monetary policy committee meeting in May, the Bank of Angola also decided to keep its main interest rate unchanged.
This week’s monetary policy meeting was Dias’ first as central bank governor, after his predecessor Jose de Lima Massano left his post in June to become economic coordination minister.
(Reporting by Sergio Goncalves in Lisbon; Writing by Anait Miridzhanian; Editing by Alexander Winning and Conor Humphries)
