Policymakers step up

African central banks had a busy month in January. Policymakers in South Africa and Kenya surprised the markets (and us) by cutting their key rates by 25bp. We expect that both countries’ central banks will make one further cut, but that rising inflation will prevent long easing cycles. Angolan and Nigerian policymakers left their key rates on hold this month, but the Central Bank of Nigeria raised their cash reserve requirement. The move, which followed a sharp fall in Nigerian interbank rates, highlighted the contradictions of Nigeria’s increasingly complex monetary policy framework, which policymakers claim is designed to encourage lending.