Kenya’s conundrum, regional rating agency

Contained inflation and higher FX reserves have given Kenya's central bank a buffer to avoid hiking interest rates for now, but we still think the shilling will eventually need to be devalued and interest rates hiked. Meanwhile, the launch of the Africa Credit Rating Agency this week is aimed at reducing the “Africa premium” but one point that has been overlooked is that there has been a steady improvement in risk profiles across much of the continent in recent years. That’s especially been the case in South Africa where fiscal tightening alongside our dovish view on interest rates should prove a supportive environment for local currency bonds.