Iran War Risk Pushes African Central Banks to Hold Rates Higher

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Or sign-in if you have an account.al(kkagid8}pisli]oh[sm59_media_dl_1.png Bloomberg(Bloomberg) — 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.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountAt 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 fertilizer 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. 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Please try againThe 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. For a calendar of forthcoming interest-rate decisions in Africa, click here. 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 Aug. 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. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.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 Aug. 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. Sign up here for the twice-weekly Next Africa newsletter,and subscribe to the Next Africa podcast on Apple, Spotify or anywhere you listen.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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