Central banks in two of Africa’s largest economies — South Africa and Nigeria — are set to change course on interest rates for the first time in years as inflation lets up.

At least five others including Morocco’s and Ghana’s are poised to follow South Africa in adjusting their policy levers lower in the coming days, with many seen undertaking small interest-rate cuts to anchor inflation expectations. Angola is set to be among those that will join Nigeria, which has raised interest rates since May 2022, in keeping policy stances unchanged.

“African central banks will continue to make monetary policy decisions with one eye on the exchange rate,” said Citi Chief Africa Economist David Cowan. “This will result in a cautious rate cycle across Africa for the rest of 2024 and into 2025, with central banks prepared to continue to run quite significantly real positive policy rates to limit currency depreciation.”

Geopolitical risks that threaten to destabilise inflation expectations could also prompt some caution among the continent’s central bankers, said Jibran Qureshi, head of African research at Standard Bank Group.

Here’s why six African nations may cut interest rates and four hold:

Real Rates

The three-week monetary policy roller coaster will start on Thursday with the South African Reserve Bank probably lowering the benchmark interest rate for the first time since the Covid-19 pandemic spurred an aggressive easing cycle in 2020. Data due Wednesday that’s expected to show annual inflation in August eased to 4.5%, the midpoint of the central bank’s target range at which it prefers to anchor expectations, as well as a benign outlook for consumer-price growth will encourage policymakers to cut the key rate by a quarter point to 8%, said Yvonne Mhango, Bloomberg Africa economist. Tapering oil prices and a stronger rand should help contain price growth. The spread between the policy benchmark and the inflation rate is already at its highest level in 18 years.

Similarly, Mozambique, Kenya, Ghana and Eswatini’s monetary policy committees are set to reduce their key interest rates. That’s as their inflation rates are forecast to fall because their currencies are either relatively stable or have appreciated against the dollar, as well as due to a recent drop in Brent crude prices.

The central bankers will also take comfort in expectations that the Federal Reserve will cut US interest rates on Wednesday and may continue to ease policy. Such a move would prevent the interest-rate differentials between the US and African economies from narrowing too much, which would make some of the continent’s currencies less attractive to investors.

With Moroccan inflation still on track to average the Bank al Maghrib’s 1.5% target for the year, its council is also likely to be among those lowering rates. While inflation may quicken from its current rock-bottom levels going into 2025, mainly due to base effects, the central bank may implement three further 25-basis point cuts over the coming year, barring an unexpected uptick in price growth, said Mark Bohlund, a senior credit research analyst at REDD Intelligence. It surprised with a quarter-point cut to 2.75% in June.

Emerging Inflation Risks

Nigeria’s policymakers on September 24 will likely pause a tightening cycle that’s lifted the key rate to 26.75% from 11.5% in just over two years. They’ll be emboldened by inflation cooling to a six-month low in August as they weigh the effects of floods in the north-east of the country and a 45% increase in gasoline costs on prices. Like Nigeria, Angola’s MPC will also want to assess what the drop in oil prices may mean for its currency and will probably opt to maintain its policy benchmark even as data suggests its inflation rate peaked in July. Oil makes up the bulk of both governments’ income.

“With inflation expectations still somewhat elevated in Angola and Nigeria,” they’ll probably leave rates unchanged over the next couple of months, Qureshi said.

Tanzania’s central bank is also expected to hold rates because of the inflationary impact of ongoing currency weakness. Its shilling has depreciated almost 4% against the dollar since June because of greenback shortages.

Lesotho’s MPC generally follows South Africa’s because its currency is pegged to the rand, but it’s unlikely to do so this time. That’s as inflation at 6.7% is expected to remain elevated and its key rate is already 50-basis points lower than its neighbour's, said Lyle Begbie, an economist at Oxford Economics Africa. “It will likely only cut in November,” he said.