Modest rate increases observed for Nigeria, Kenya; Ghana will hold
JOHANNESBURG, Sept 26 (Reuters) – Nigeria and Kenya are expected to raise interest rates by a modest 50 basis points in the coming days after months of massive efforts by other African central banks to try to calm runaway inflation, according to a Reuters poll, while Ghana will hold the fire.
This week’s benchmark interest rate decisions remain a very close call with no clear majority by analysts.
A shortage of dollars is fueling inflation in Ghana and Nigeria, as well as other parts of the continent like Ethiopia, and all are still licking their wounds following waves of rate hikes in the United States that siphoned off notes green and weakened national currencies.
“Tighter global financial conditions and continued dollar appreciation will set the tone for future central bank decisions in sub-Saharan Africa,” said Standard Chartered’s Razia Khan, who expects action in Nigeria and in Kenya.
For Nigeria, a median of 10 analysts suggested rates would rise 50 basis points (bps) to 14.5% on Tuesday. But while four respondents agreed with the median, the rest were split between no change and up to a 150 basis point increase.
The Central Bank of Kenya has been one of the least active on the continent in a election year which saw William Ruto sworn in as the fifth President of Kenya. Rates were to be raised a second time by 50 basis points on Thursday, taking them to 8.0%.
But again, the result was tight with the breakdown of 11 analysts showing that five expected no change, four saw a 50 basis point rise and two expected a 100 basis point rise.
As in South Africa, inflation was high in Kenya but not as rapid as in West Africa. South Africa raised its repo rate by 75 basis points last week and similar increases are expected over the next two quarters.
A median of nine analysts said rates would be held at 22.0% in Ghana. Five respondents said there would be no change while the rest expected an increase of between 100 and 300 basis points.
The Bank of Ghana has hiked rates by 850 basis points over the past year, but that hasn’t helped stop the fall of its currency, which has been one of the worst performing emerging market currencies. , having lost more than half of its value this year.
“We expect inflation to peak in the fourth quarter, before starting to decline, while the cedi has started to move sideways in recent weeks,” said Pieter du Preez of Oxford Economics.
Consumer inflation in Ghana soared to 33.9% in August, its highest level since 2001 and the same month as a increase of 300 basis points interest rates to 22.0%, the largest increase in lending rates in the country’s history.
Khan said that as Ghana’s tightening was still fueling the economy, “we no longer expect any further rate changes imminent.”
Ghana’s central bank has rescheduled its next interest rate decision from October 7 to September 26 to coincide with the end of an International Monetary Fund mission to the country.
Reporting by Vuyani Ndaba; Editing by Alison Williams
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.