Not hopping on the bandwagon of EM rate hikes

Central banks in Sub-Saharan Africa bucked a recent “trend” of interest rate hikes in other emerging markets this month. Policymakers in South Africa, Nigeria, Kenya and Angola all kept their benchmark rates unchanged. The backdrop of rising US Treasury yields might have contributed to the emergence of a hawkish minority in Nigeria and the disappearance of a dovish contingent on South Africa’s MPC. But we suspect that central banks in Africa will be keen to retain an accommodative policy stance in the coming months as recoveries prove sluggish. Rate hikes are probably a long way off in South Africa and weak economic activity could even tilt the balance towards more loosening in Nigeria and Angola later this year. Kenya’s central bank governor has also left the door open to further rate cuts.