East Africa: Regional markets outlook stronger as inflation cools

East Africa's financial markets are poised for growth as Central Bank Governors in the region continue to implement measures to combat inflation and stimulate economic activity. Pamela Akidi, Manager, Retail Sales Global Markets at Stanbic Bank Uganda, shared insightful perspectives on the upcoming Monetary Policy Committee (MPC) meeting in Kenya and the trends shaping the region's financial landscape. In a conversation with CNBC Africa, Akidi highlighted key points that point towards a positive outlook for East Africa's markets. The expectation for the upcoming MPC meeting in Kenya is a further cut in interest rates by around 100 basis points. This move follows a previous cut of 75 basis points, and with inflation nearing the lower bound of the target at 2.7 percent year-on-year, a rate cut is anticipated to stimulate economic growth and increase lending. Akidi emphasized that the recent trend of rate cuts is driven by declining inflation rates in countries like Uganda and Kenya, as well as global factors influencing central banks' decisions. She noted that both inflation and global economic conditions have played a significant role in shaping the monetary policy direction in the region. From a currency perspective, Akidi shared insights into the performance of the Uganda shilling and the Kenya shilling. She mentioned a mild weakening of the Uganda shilling due to increased corporate demand in sectors like energy and manufacturing, as well as a reduction in dollar inflows from commodity exporters. However, she pointed out that seasonality typically leads to an appreciation of the Uganda shilling in December, driven by remittance inflows. Regarding the Kenya shilling, Akidi highlighted increased demand and offshore selling, but anticipated remittance inflows to support the currency and maintain stability. She also emphasized the efforts of the Central Bank of Kenya in boosting reserves to intervene and stabilize the currency when needed. Looking ahead to the end of 2024, Akidi projected an appreciation of the Uganda shilling and a stable trading environment for the Kenya shilling. Both currencies are expected to benefit from seasonal factors and prudent monetary interventions. Overall, the outlook for East Africa's financial markets appears optimistic, with central banks taking proactive steps to address inflation pressures and support economic recovery.