How will African central banks react to sticky inflation?

Inflationary pressure poses a significant challenge for central banks in Africa, particularly in countries like Ghana, Nigeria, and Angola. Ghana's inflation rate for June climbed to 42.5 percent year-on-year, while analysts anticipate a surge in Nigeria's inflation following the removal of petrol subsidies. Rhode Luemba, Head of Flow Sales at Standard Bank Group, shared insights on the forthcoming monetary policy committee (MPC) meetings in Ghana and Nigeria. Despite efforts to curb inflation through monetary policy, the results have not translated into lower inflation numbers as expected. The Bank of Ghana implemented a tighter policy stance, which yielded a slight decline in inflation figures, but risks remain due to the government's deficit monetization. As for Angola, the optimistic growth forecast of 3 percent for the year appears unrealistic amidst challenges. The Central Bank is expected to adopt a balanced approach in their MPC meeting to support the economy. Tightening monetary policy to bolster the Kwanza and counter inflationary pressures seems necessary, especially with the currency's significant depreciation in recent months. Shifting the focus to the oil market, voluntary production cuts by major players like Russia and Saudi Arabia have not significantly lifted oil prices beyond the $70 to $80 range. Recent increases in oil prices, amidst concerns of a pause in the US Federal Reserve's rate hike, underscore the market's volatility. OPEC's decisions to cut production face challenges from the global economic slowdown and potential rate hikes, particularly from the US. While OPEC aims for higher oil prices, the ongoing economic uncertainties may require them to adjust their expectations. The rise in US oil production poses a threat to OPEC's strategies, as the US competes with OPEC countries in the oil market. US producers ramping up production could further complicate OPEC's efforts to stabilize oil prices. Uncertainties loom over OPEC's future decisions, as maintaining production cuts might not be sustainable in the long run. In conclusion, central banks in Africa are confronted with the dilemma of addressing rising inflation amid global economic challenges and volatile oil prices. The upcoming MPC meetings in Ghana and Nigeria will be crucial in determining the monetary policy direction. As countries navigate through these uncertain times, the need for strategic and coordinated efforts to manage inflation and support economic growth becomes paramount.