Some African central banks to hold rates

Bloomberg

Central banks in some of Africa’s biggest economies will likely look past high inflation and US policy tightening and hold interest rates over the coming weeks to shore up their recoveries from the Covid-19 stasis.
Since monetary policy makers on the continent last met, US consumer prices soared to a near four-decade high, setting the stage for the Federal Reserve to begin hiking interest rates as soon as March, which could lead to a sell-off of emerging-market currencies and dollar bonds in nations with high debt.
Price growth in Nigeria, Ghana, Angola and Zimbabwe that was already in double-digits has accelerated, stoked by rising food and oil prices. Even so, most major central banks are set to prioritize supporting fragile economies over taming price growth by leaving key interest unchanged in the coming days.
The central bank of Nigeria will likely keep its key rate at a six-year low despite a surprise uptick in
inflation in December.

Africa’s “growth recovery is a lot slower and weaker, and implies that central banks have to be a lot more cautious when it comes to the tightening,” said Yvonne Mhango, Renaissance Capital’s head of research for the continent. She also cautioned that its nations lacked the resources to provide the level of fiscal stimulus that helped developed markets like the US recover faster.
Borrowing costs are only expected to rise in South Africa, whose liquid capital markets make it vulnerable to tightening by developed market central banks; and Zimbabwe, which is contending with an inflation rate of more than 60% and a sliding currency.
The central bank of Nigeria will likely keep its key rate at a six-year low despite a surprise uptick in inflation in December.
Governor Godwin Emefiele signalled in November that the monetary policy committee’s existing stance should “continue for a little longer” to stabilize prices and buttress economic growth.
“We see the CBN raising the policy rate by 150 basis points in 2022, but for this tightening to be delivered in the second half of the year,” said David Faulkner, economist at HSBC.
Eight of the nine economists in a Bloomberg survey expect rates to remain steady and one sees a 100 basis points increase.