Will African central banks keep on cutting interest rates?

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Very few countries have space to ease monetary policy further, given continued exchange-rate pressures and rising inflation, one economist says

After aggressive interest-rate reductions to shore up their economies against the havoc wrought by the coronavirus pandemic, central bankers in most Sub-Saharan African countries will ask themselves whether the cutting cycle is over when they meet over the next nine days.

“Although core inflation has remained relatively stable, increased monetisation of fiscal operations, given wider deficits brought on by the pandemic, likely will result in rising price pressures in coming months.”SA — July 23: Repurchase rate 3.75%; inflation 2.1% While inflation has dropped below the Reserve Bank’s target band for the first time since 2005, the MPC projected such a breach for the second and third quarters, and governor Lesetja Kganyago said in June the panel would only step in if this proved to be persistent. Forecasts show inflation will pick up into 2021, which could lead to negative real interest rates.

“At the current juncture, what the National Bank of Angola should be doing is what many central banks have done: provide liquidity to the economy to face the crisis,” said Carlos Rosado de Carvalho, an economist at the Catholic University of Angola.Ghana — July 27: Policy rate 14.5%; inflation 11.2%

Source: Loan Digest (loandigest.net)

 

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