adminAfrica’s three biggest economies are poised to raise interest rates this week, while policy makers in several other countries stake out different approaches to navigate inflation shocks and bring prices under control.
The central banks of Nigeria, South Africa and Egypt are among six likely to tighten monetary policy in the days ahead.
Another six countries are set to pause as they assess the impact of previous hikes and relief measures to contain prices. Angola may join a handful of nations that cut borrowing costs this year.
Topping the agenda will be the implications that weaker local currencies will have on the cost of imported goods, as aggressive rate hikes by the Federal Reserve and expectations of more to come boost the dollar.
The repercussions of Russia’s war in Ukraine and an anticipated downturn in Europe and China, alongside emerging price pressures from extreme weather events, are also likely to be in the spotlight.
Worries over unanchored inflation expectations and increased depreciation pressure on the rand will probably see the South African Reserve Bank raise its key rate for a sixth straight meeting, said Sanisha Packirisamy, an economist at Momentum Investments.
Governor Lesetja Kganyago said in an interview September 8 that the central bank must do whatever it takes to ensure price growth is under control and on a downward trajectory toward the 4,5 percent midpoint of the monetary policy committee’s inflation-targeting range. Inflation has been above 4,5 percent since April 2021.
All the economists polled by Bloomberg expect the MPC to raise its benchmark to 6,25 percent from 5,5 percent, in what would be the first time it hiked rates by 75 basis points at consecutive meetings. Traders are fully pricing in an increase of that magnitude, but see a chance of a bigger move.
Economists surveyed by Bloomberg are divided over what Egypt’s central bank will do at its second meeting since Hassan Abdalla became acting governor after Tarek Amer’s shock resignation.
While a minority of forecasters predict the benchmark deposit rate will stay at 11,25 percent for a third meeting, most see an increase of 50 to 100 basis points to curb annual inflation that hit its highest level in almost four years.
Should Abdalla favour a more flexible exchange rate to help authorities secure a new loan from the International Monetary Fund, it would raise the risk of currency depreciation that will feed into price pressures. As a result, the MPC is likely to lift rates by 100 basis points, said Maya Senussi, a senior economist at Oxford Economics.
A hike would also make the North African nation’s assets more attractive after months of quickening price gains turned its rates negative when adjusted for inflation, undercutting the appeal of the country’s domestic bonds and bills to foreign investors. The country has seen some $20 billion in foreign outflows from its local debt market this year. — Bloomberg.
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