The South African Reserve Bank is expected to hike interest rates by the end of March.
Central banks in Africa’s biggest economies are poised to raise interest rates this month to contain sticky inflation and deter a selloff in their assets exacerbated by the collapse of US lender Silicon Valley Bank and stress at Credit Suisse Group AG.
A gauge for government dollar bonds in Africa has dropped every day of the past seven, pushing the yield on the average security on the continent up 164 basis points to 14.36%. That’s the highest level since 3 November. All the bonds in the index are rated junk. Policymakers nearing the end of the interest-rate hiking cycle, will probably raise the benchmark by 25 basis points to address potential risks to the inflation outlook, said Sanisha Packirisamy, an economist at Momentum Investments. They include the knock-on effects of a weaker currency, with the rand having weakened about 7% against the dollar this year.
South Africa’s MPC may take direction from the European Central Bank, which delivered a 50 basis-point hike last week. The ECB “made a loud statement to markets to suggest that fighting inflation is their top priority but they stand ready to support the financial sector if needed through financial stability tools,” Packirisamy said.
After lifting the benchmark interest rate by a combined 14.5 percentage points since November 2021, economists surveyed by Bloomberg expect the Bank of Ghana’s MPC to stand pat. Zimbabwe will likely cut the world’s highest interest rate for a second time this year, said Prosper Chitambara, a Harare-based economist. The recent adoption of blended consumer prices, which tracks costs in US and Zimbabwean dollars, rather than just the local-currency, means a deceleration in inflation will continue, he said.
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