Tightening cycles have a bit further to run

Most central banks across Sub-Saharan Africa raised interest rates over the past month and, in contrast to many other parts of the emerging world, we think tightening cycles will last a while longer. Interest rates were hiked in Nigeria, South Africa, Ghana and Kenya as policymakers, in the words of South African Reserve Bank Governor Lesetja Kganyago, try to “tame the monster of inflation”. Inflation has risen further above targets in much of the region in recent months and, even where it has peaked such as in South Africa, underlying price pressures are building. If, as we expect, global recession fears cause African currencies to come under renewed pressure, that will only add to reasons for policymakers to stay in hawkish mood. Tightening cycles across the region are unlikely to draw to a close until early next year.