The Monetary Policy Committee (MPC) of Angola’s central bank raised on June 29 the benchmark interest rate by 50bp to 9.75% in an effort to tame rising inflation. The MPC, which holds regular monthly meetings, kept the key rate on hold for two consecutive months after a 25bp hike in March, triggered by rising inflation and a depreciation of the local kwanza currency.

Angola’s annual consumer price inflation accelerated for the fourth straight month in May, reaching a 20-month high of 8.86%, up from 8.23% in April. The monthly inflation rate quickened to 1.21% from 0.85%, and was by 0.59pp above its May 2014 level.

The average exchange rate of the kwanza against the US dollar weakened by 0.91% m/m to AOA110.84 per $1 in May, following a 1.21% depreciation in April.

Credit to the economy grew by a modest 1.83% in the first five months of the year. It stood at AOA3.428trn at end-2014.

Angola’s GDP growth and macroeconomic stability were undermined by the lower oil prices, as oil-related revenues accounted for 70% of total fiscal receipts in 2014 and an estimated 95% of exports.

Angola’s government targets to maintain the country’s economic growth rate at 6.6% this year, keep inflation within a 7%-9% target range and maintain the level of gross international reserves at about six months of imports. According to the IMF’s latest forecast, Angola’s average annual inflation will accelerate to 8.4% this year from 7.3% in 2014.

The next meeting of the MPC is scheduled for July 27.