Kenya restarts tightening, case for a hold in SA builds

Kenya’s central bank hiked interest rates by 100bp, to 10.50%, at an unscheduled meeting this week. The move was pinned on an increase in inflation in May, but more than anything it seems to be a strong attempt by new governor Kamau Thugge to establish his credibility. Any further upside inflation surprises are likely to be met with more tightening. In a similar vein, policymakers at the South African Reserve Bank have continued to sound hawkish this week. But the incoming data have reinforced our view the tightening cycle is now at an end.