Standard Bank: Africa's monetary policy tighter than it seems

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Stndard Bank building. Photo: Gallo Images/Foto24/Brendan Croft

Central banks in several African nations are likely to overlook quickening inflation and keep interest rates on hold at least until the third quarter of next year as higher money-market yields suggest price-growth expectations remain anchored, according to the head of Africa research at the continent’s biggest bank.

"Monetary policy is tighter than implicitly suggested by conventional rates across the African continent," Standard Bank Group’s Jibran Qureishi said in an interview.

Yields at the short end of the curve in Nigeria and Tanzania have risen, even though monetary policy has been dovish in both countries, analysts led by Qureishi said in Standard Bank’s latest African Markets Revealed report that focuses on 18 countries.

In Zambia, where the monetary policy committee surprised with a 50 basis-point rate increase in February, yields across the curve have been steady, suggesting the central bank is playing "catch-up to an already tighter policy stance," they said.

That means central banks on the continent, except for Zambia, where Governor Christopher Mvunga has warned interest rates could go up further if inflation doesn’t come down, are likely to favour a neutral stance with an accommodative bias, and could even allow price growth to rise beyond target, according to the report.

Most African central banks have kept policy unchanged this year on concerns about economic growth. In addition to Zambia, Mozambique and Zimbabwe have tightened, while Ghana and the Democratic Republic of Congo cut rates.

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