Tightening cycles have further to run

The tightening cycles that began in Ghana and South Africa earlier this year continued in July and, in both cases, we think that further interest rate hikes are likely before the end of 2014. Ghana’s rate hike failed to stem the slide in the cedi, meaning that inflation is likely to continue soaring. Meanwhile, the South African Reserve Bank hinted that above-target inflation will result in further gradual tightening. Elsewhere, although the Central Bank of Kenya kept interest rates on hold this month, we expect policy to be tightened modestly this year as inflation looks set to breach target range in the near term.