Interest rates were kept on hold in South Africa, Nigeria, Kenya and Ghana this month, but the more interesting aspect of the announcements was the notably hawkish tone struck by policymakers. In South Africa, rate hikes were discussed by the MPC, despite the lacklustre growth outlook. This was due to concerns over further rand weakness and the effect this could have on core inflation. Meanwhile, policymakers in both Nigeria and Ghana remain wary of the effect of loose fiscal policy on inflation. Finally in Kenya, inflation is currently above target, and a reliance on short-term inflows of capital leaves the economy vulnerable to an eventual tightening of global monetary conditions. The upshot is that, although we think interest rates are likely to stay unchanged in sub-Saharan Africa’s four major economies in the near term, monetary policy looks set to be tightened over the next 12-18 months.
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