Africa’s major central banks embarking on policy easing cycle ride

JOHANNESBURG: Africa’s major central banks are entering an easing cycle as they try to stimulate growth after months of drought, austerity drives and confidence issues across the continent, a Reuters poll found yesterday.

Much of southern and eastern Africa is still recovering after an El Niño-related drought wilted crops last year.

Poor business confidence in South Africa and foreign exchange restrictions in Nigeria have also hampered growth.

“We expect that African monetary policy is entering a widespread and protracted period of policy easing. This will provide a boost to growth,” said John Ashbourne, Africa analyst at Capital Economics.

Ghana, which agreed a threeyear fiscal discipline deal with the International Monetary Fund in exchange for aid in 2015, cut 100 basis points from its benchmark interest rate in May and is expected to do the same on Monday, putting it at 21.50 per cent.

Medians in the poll predict South Africa will make a first quarter trim of 25 basis points to 6.75 per cent and while Kenya will hold steady on Monday it is expected to cut 100 basis points to 9.00 per cent in the second quarter of next year.

Nigeria is expected to hold rates at 14.0 per cent on Tuesday, and through this year, but will reduce borrowing costs by 175 basis points across 2018.

Aly- Khan Satchu, CEO of Nairobi-based Rich Management said policymakers in Africa’s biggest economies have lost credibility and it would be difficult to regain that. — Reuters