The central banks of Nigeria, South Africa and Egypt are among six likely to tighten monetary policy in the days ahead.
This is even as policy makers in several other countries stake out different approaches to navigate inflation shocks and bring prices under control.
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 per cent midpoint of the monetary policy committee’s inflation-targeting range. Inflation has been above 4.5 per cent since April 2021.
All the economists polled by Bloomberg expect the MPC to raise its benchmark to 6.25 per cent from 5.5 per cent, 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 per cent 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.
At an extraordinary meeting last month, the Bank of Ghana raised its key interest rate by 3 percentage points, adding to 550 basis points of increases since November. It also announced measures to boost foreign-exchange reserves and support the cedi.
Last month’s
hike suggests “the central bank has already front-loaded any move they want to make,” said Courage Martey, an economist at IC Securities, an Accra-based brokerage and asset management firm.
A downswing in inflation will likely see rate setters in Angola, which vies with Nigeria as Africa’s biggest oil producer, cut borrowing costs, making it an outlier at a time of global monetary tightening.
Price growth has already dropped below 20 per cent for the first time in more than two years and the central bank forecasts it will slow to less than 18 per cent by the end of the year. Governor Jose de Lima Massano said this week that a rate cut may be in play given the stabilization of Angola’s foreign-exchange market and consistent declines in inflation.
The Banco Nacional de Angola will probably reduce its benchmark by 200 basis points to 18 per cent as “the inflation rate has been decreasing and may stay close to 14 per cent by the end of the year,” said Wilson Chimoco, an economist at Universidade Catolica de Angola.
Nigeria’s central bank is expected to step up monetary tightening after inflation hit a fresh 17-year high in August. It threatens to remain elevated because of floods in its food-producing regions, a surge in diesel costs and continued currency weakness.Governor Godwin Emefiele said at the July MPC meeting that policy makers will lean toward additional hikes if inflation continues to be “aggressive.” An increase in the benchmark would take it over 14% for the first time since the rate was adopted in 2006.
The central bank “may feel there is still some scope to raise rates in order to attract foreign exchange inflows,” said Joachim MacEbong, lead analyst at Lagos-based Acorn and Sage Consulting. “Inflation remains a serious concern.”
Morocco hasn’t raised interest rates for more than a decade, and it might keep bucking the global trend for monetary tightening.
With wage hikes for lower-earning households kicking in this month and subsidies due to offset energy costs for consumers, authorities may wait to see the impact on inflation, which is running at its highest since the 1980s.
