By Monique Vanek.
African policymakers are set to keep interest rates higher for longer as renewed hostilities between the US and Iran fan fresh inflation fears, especially in countries that are net fuel importers.
At least 11 central banks will announce interest-rate decisions over the next three weeks, with expectations shifting in several cases after the collapse of a US-Iran truce earlier this month led to the renewed closure of the Strait of Hormuz, causing oil and fertiliser prices to rise.
“For many oil-importing economies, higher fuel prices are now feeding into transport, food and broader inflation dynamics,” said Sam Singh-Jami, head of broader Africa research at Rand Merchant Bank.
The issues in the strait, a critical conduit for energy and other commodities, “will see discussions move from how soon central banks can resume easing to how long they need to stay restrictive to contain inflation and protect currencies, resulting in a more hawkish tone across most African monetary policy committees,” Singh-Jami said.
Even so, central banks are entering the latest phase of uncertainty in stronger positions.
“Most central banks in the region have adopted more prudent monetary policy for some time and that hard-won credibility should stand them in good stead in the face of another external shock,” said Hasnain Malik, head of EM equity and geopolitics strategy at Tellimer.
The slew of upcoming rate decisions kicks off with Nigeria on Tuesday, followed by Ghana on Wednesday and South Africa on Thursday. It ends with Uganda on August 13.
The Central Bank of Nigeria and Bank of Ghana — both of which have room to cut — are expected to keep borrowing costs unchanged for a second time in a row at 26.5% and 14% respectively, after reductions earlier this year.
“It is very unlikely that the CBN would restart monetary easing as long as inflation expectations remain elevated,” said Gergely Ürmössy, emerging markets strategist at Societe Generale SA. “In the CBN’s latest inflation survey, over half of respondents expected inflation to accelerate over the next six months; in March, before domestic fuel and energy prices spiked, roughly 60% expected inflation to hold steady or decelerate.”
With inflation turning higher in Ghana and unlikely to let up because of higher import costs, the central bank will likely also be cautious about easing.
South Africa is predicted to raise rates by another 25 basis points to 7.25%. Traders had earlier this month pared bets for a hike, after Reserve Bank Governor Lesetja Kganyago said lower oil prices may bring inflation back to its 3% target sooner than anticipated from its current level of 4.5%. But a subsequent rebound in crude prices has swung expectations back toward another increase.
The rates call in Africa’s largest economy will weigh on neighboring Eswatini, Lesotho and Namibia, whose currencies are pegged to the rand and will announce their own decisions by August 12.
After pausing a record easing cycle in March, Mozambique is expected to raise borrowing costs next week as surging inflation, foreign-exchange shortages and fiscal pressures intensify. “We forecast the MIMO rate to increase incrementally to 10.5% by the end of 2026” from 9.25%, Singh-Jami said.
Malawi, which faces many of the same challenges as Mozambique, is expected to keep rates unchanged on July 30. Kenya, Mauritius and Uganda are also forecast to stand pat when they meet a week later to assess the impact of inflationary pressures.
Kenya’s latest inflation reading undershooting the central bank’s forecast reduces the probability of a rate hike at the next MPC meeting in August, Ürmössy said.
“At the same time, we see no scope for outright rate cuts. Inflation expectations have risen significantly since the start of the year, while the possibility of second-round effects from higher energy prices warrants a cautious approach to monetary policy,” he said.
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