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Central banks in Africa’s biggest economies are poised to raise interest rates this month to contain sticky inflation and deter a selloff in their assets exacerbated by the collapse of US lender Silicon Valley Bank and stress at Credit Suisse.
South Africa, along with Nigeria, Egypt, Morocco and Kenya are projected to raise borrowing costs in the next two weeks. Monetary authorities in nations such as Ghana and Angola, where inflation is on a downswing are predicted to hold.
The South African Reserve Bank’s (SARB's) fight against inflation is however unlikely to be derailed by weakness in the global banking system.
Policymakers nearing the end of the interest-rate hiking cycle, will probably raise the benchmark by 25 basis points to address potential risks to the inflation outlook, said Sanisha Packirisamy, an economist at Momentum Investments. They include the knock on effects of a weaker currency, with the rand having weakened about 7% against the dollar this year.
Average inflation expectations for the year stand at 6.3%, well above the central bank’s 4.5% target.
While traders have pared bets for a quarter-point increase, that’s largely in line with expectations of less tightening by the Fed after the collapse of SVB. South Africa’s Monetary Policy Committee (MPC) may take direction from the European Central Bank (ECB), which delivered a 50 basis-point hike last week. The ECB "made a loud statement to markets to suggest that fighting inflation is their top priority but they stand ready to support the financial sector if needed through financial stability tools," Packirisamy said.