Bloomberg
The main African central banks are in no hurry to raise interest rates
(Bloomberg) – Central banks in some of the largest economies in sub-Saharan Africa may be more concerned about the impact of a possible third wave of coronavirus infections and slow vaccine adoption than accelerating inflation, with borrowing costs unchanged for now. Monetary Policy Committees in Ghana, Nigeria, South Africa, Kenya and Angola are unlikely to follow those in Brazil, Turkey, Mozambique, Zambia and Zimbabwe when they announce their rate decisions over the next eight days. Inflation in the continent’s two largest oils Producers Nigeria and Angola are double digits and rising, and currencies remain under pressure. However, the risks to the recovery of most economies in the region from their worst slump in half a century last year remain high. After some African central banks fell to record lows in 2020, most hit the limit for monetary easing, according to Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank, a lengthy hiatus in policy rates in countries seems likely in where exchange rate pressures are less severe. The region’s policymakers can also take comfort in an accommodative global monetary policy environment, with the Federal Reserve signaling that US interest rates will stay near zero through 2023. Lower global interest rates mean African central banks will not be forced to tighten policies to keep local assets attractive to offshore investors What Bloomberg Economics Says … “We anticipate that Africa’s major central banks will be in the coming Weeks on hold to support further recovery in production. However, the accommodative stance is unlikely to last any longer due to rising inflationary pressures. “- Boingotlo Gasealahwe, African Economist – Click here to read Bloomberg Economics’ analysis. Here’s what central bankers can do in sub-Saharan Africa: Ghana, March 22nd Rate: 14.5% Inflation Rate: 10.3% (February) Inflation Target: 8% +/- 2Ghana’s MPC is expected to lower its policy rate for a sixth Hold meeting as it assesses how new tax measures were announced this month and higher utility costs affect inflation was above target for most of last year. The base rate is likely to be kept to fuel the country’s economic growth, said Agyapomaa Gyeke-Dako, an economics lecturer at the University of Ghana Business School. West Africa’s second largest economy fell into recession last year and government estimates could rebound to expand 5% in 2021. On the back of weak demand growth, an appreciating currency and the prospect of lower inflation, the central bank could potentially ease in the third quarter, Societe Generale said in a statement earlier this month. Nigeria, March 23 Policy Rate: 11.5% Inflation Rate: 17.3% (February) Inflation Target: 6% -9% The Nigerian MPC is likely to keep its policy rate unchanged even with inflation at a four-year high as it seeks to build an economy that emerged from a recession in the fourth quarter and in which a third of the workforce is unemployed. While the central bank will continue to monitor inflation, accommodative policies are key to accelerating the recovery, Governor Godwin Emefiele said in a speech last month. The government’s U-turn on planned price increases could give the MPC room to continue to focus on stimulating economic growth. Unless President Muhammadu Buhari’s government decides to liberalize gasoline and electricity tariffs, interest rate hikes may be unlikely this year, said Mohamed Abu Basha, head of macroeconomic analysis at EFG Hermes Holdings. South Africa, March 25th. Buyback rate: 3.5% Inflation rate: 3.2% (January) Inflation target: 3% – 6% The South African central bank is likely to hold the key rate for a fourth meeting, even if the fuel and electricity price increases due in April bring inflation closer to the Inflation will likely mean the five-member panel will unanimously vote for an unchanged stance after their preferences were split between cut and hold at the last three meetings, said Elize Kruger, an independent economist. All 15 analysts in a Bloomberg poll expect the MPC to keep the benchmark at a record low, and forward rate agreements speculating about borrowing costs have a less than 45% probability of a 25 basis point hike. The MPC could use the accommodative global environment to “maximize the momentum they can give the economy through low interest rates,” Kruger said. The panel is likely to remain tolerant of negative real rates as long as the rand is relatively stable and will be cautious about preemptively tightening in recessive conditions, she said. Kenya, March 29 Central bank interest rate: 7% Inflation rate: 5.8% (February) Inflation target: 5% +/- 2.5 The MPC in East Africa’s largest economy is expected to keep its key interest rate stable for the seventh year in a row as it fears a Third wave of Covid-19 infections to be feared The 10-month high is worrying, the key rate is unlikely to be raised immediately, said Renaldo D’Souza, head of research at Sterling Capital in Nairobi. The political stance will be based on the macroeconomic conditions and the effects of virus control measures. Angola, March 29th BNA rate: 15.5% Inflation rate: 26.39% (Luanda, February) 2021 Inflation target: 18.7% Angolan policymakers are likely to keep the key rate even if the country is at a rate with inflation Three-year high has to contend with. This is because much of the price pressures are viewed as imported and the transition from central bank interest rate to inflation and consumer demand is weak at Africa’s second largest oil producer. Instead of trying monetary policy, the central bank tries to lower the price of growth by adjusting the amount of kwanza in circulation and in line with inflation targets. Maintaining the key interest rate gives current and new credit transactions granted by commercial banks a higher chance of success, said Governor Jose de Lima Massano after the central bank left the benchmark unchanged in January. For more articles like this, visit bloomberg.comSubscribe Now, stay up to date with the most trusted business news source. © 2021 Bloomberg LP