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Rates on hold, but cuts coming in Ghana & Nigeria

Policymakers in South Africa, Nigeria and Ghana sang from the same hymn sheet this week by maintaining their key rates on hold. While we think that the window for monetary easing has now closed in South Africa, we expect rate cuts in Nigeria and Ghana before the end of this year.
John Ashbourne Senior Emerging Markets Economist
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The Central Bank of Nigeria delivered a surprise 150bp interest rate hike, to 13.00%, today amid mounting inflation and balance of payments concerns. We expect rates to be raised by another 100bp, to 14.00%, in July but further tightening seems unlikely especially as the 2023 elections come into view.

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The current risk-off sentiment means that the South African rand’s slide this week will probably continue in the near term. And escalating containment measures will take an economic toll, despite worries about their effectiveness. In the meantime, the coronavirus and low commodity prices are putting pressure on most African economies’ balance of payments positions and pushing many sovereigns closer to default.

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