Nigeria and Kenya are likely to hike interest rates by a modest 50 basis points in the coming days after months of heavy lifting from other African central banks to try to calm rampant inflation, a Reuters poll found, while Ghana will hold fire.
This week’s benchmark interest rate decisions remain a very close call without any clear majority by analysts.
A scarcity of dollars is fuelling inflation in Ghana and Nigeria, as well as other parts of the continent like Ethiopia, and all are still licking their wounds from waves of rate increases in the United States that have siphoned away greenbacks and weakened domestic currencies.
“Tightening global financial conditions and continued dollar appreciation will set the tone for upcoming sub-Saharan Africa central bank decisions,” said Razia Khan at Standard Chartered, who expects action in both Nigeria and Kenya.
For Nigeria, a median of 10 analysts suggested rates would increase by 50 basis points (bps) to 14.5 per cent on Tuesday. But while four respondents agreed with the median the rest were divided between no change and up to a 150 basis points (bps) lift.
The Central Bank of Kenya has been one of the least active in the continent in an election year that saw William Ruto sworn in as Kenya’s fifth president. Rates were expected to be hiked for a second time by 50 bps on Thursday, taking them to eight per cent.
But again, the outcome was a close call with the breakdown of 11 analysts showing five predicted no change, four saw a hike of 50 bps and two expected a 100 bps increase.
Like in South Africa, inflation has been high in Kenya although not as fast as in west Africa. South Africa increased its repo rate by 75 bps last week and similar hikes are expected in the next two quarters.
A median of nine analysts said rates would be held at 22.0 per cent in Ghana. Five respondents said no change while the others expected a lift of between 100 and 300 bps.
“We expect inflation to peak in Q4, before starting to recede, while the cedi has started to move sideways in recent weeks,” said Pieter du Preez of Oxford Economics.