From South Africa to Egypt, key African central banks are choosing to keep interest rates elevated for longer, prioritising protection against external shocks and currency stability over faster monetary easing.
A Bloomberg survey of 11 central banks due to announce policy decisions over the next two weeks found seven expected to hold rates steady, three likely to hike and only one projected to cut. Policymakers are wary of fresh pressures from surging energy prices linked to the Iran war, volatile food costs and global financial turbulence that could quickly reverse recent inflation gains.
The picture across the continent is uneven, but the dominant theme is caution. In Sub-Saharan Africa outside Nigeria, recent decisions show a three-way split: some banks have paused after aggressive easing, a few are still tightening, and others are holding steady as they assess risks. Egypt, Ghana and Kenya, for example, have left rates unchanged after cutting earlier in the cycle, while Ethiopia and Tanzania have moved to raise rates.
Current policy rates reflect this diversity: Nigeria’s benchmark stands at 26.5%, Egypt’s overnight deposit rate at 19%, Kenya’s central bank rate at 8.75% and South Africa’s repo rate at 7%. Rwanda has been among the most hawkish, lifting its key rate to 8.75%, the highest since 2009, to tame double-digit inflation. By contrast, Angola has begun cutting, taking its policy rate down to 14.75%, the lowest since 2016, as inflation falls into single digits.
Central bankers cite several overlapping reasons for staying tight:External shocks: Escalating Middle East tensions and the Iran war are feeding through to oil prices, freight costs and import bills, raising the risk of a new inflation spike.Currency defence: Higher rates help support local currencies by making domestic assets more attractive, limiting imported inflation and reducing pressure on foreign reserves.Anchoring expectations: After years of volatile inflation, many banks want to ensure that price expectations do not become unmoored again, even as headline inflation moderates in some countries.
In Kenya, the Central Bank explicitly pointed to Middle East tensions as a reason to pause its rate-cutting cycle, warning that cheaper loans could stoke demand and prices just as external risks are rising. Commercial lending rates remain elevated, averaging around 14.3%–14.7%, keeping pressure on borrowers and keeping non-performing loans near 14.6%.
The stance comes with a cost. High borrowing costs constrain business investment, raise debt-servicing burdens for governments and households, and can weigh on growth and employment. Yet for many policymakers, the memory of past inflation crises and currency crashes makes them reluctant to ease too quickly.In South Africa, the Reserve Bank raised rates to 7% in May and has held there since, balancing a 3% inflation target against weak growth and upcoming electoral uncertainty. In West Africa, the BCEAO kept its main rate at 3% in September even as inflation in the WAEMU turned positive again, judging that price pressures remain manageable but warrant close monitoring.For now, the message from major African central banks is clear: rates will stay restrictive as a buffer against shocks, with easing likely to be gradual, data-dependent and easily paused if global conditions deteriorate.
Africa Presents is a Pan-African digital magazine and monthly publication covering politics, business, economy, culture, tech, and the stories shaping Africa and its diaspora. Visit africapresents.com and follow @AfricaPresents for daily coverage and monthly themed magazine editions.
to
Leave a comment