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South Africa cuts main interest rate as inflation falls within range

Comments (0) Actualites, Africa, Economy

PRETORIA (Reuters) – South Africa’s central bank cut its main interest rate to 6.5 percent on Wednesday, in another boost for the economy after ratings agency Moody’s left intact its last investment-grade credit rating.

Traders and economists had expected the 25 basis-point cut in the repo rate after a slowdown in consumer price inflation to 4.0 percent in February, which put price growth well within the central bank’s 3-6 percent target range.

It was the first easing step since July and comes as South Africa rides a wave of investor optimism in the wake of President Cyril Ramaphosa replacing scandal-plagued Jacob Zuma as head of state in February.

The rand fell, however, as the rate cut dents somewhat the appeal of local assets versus developed-market peers. Banking stocks also fell.

South African Reserve Bank Governor Lesetja Kganyago told a news conference that inflation risks had subsided somewhat since January and that the bank had raised its economic growth forecast for this year to 1.7 percent from 1.4 percent.

But he said that the bank had not started “a journey of cutting” and that the future path of the repo rate would depend on data.

Four members of the Monetary Policy Committee voted to cut the rate while three wanted to keep it on hold, Kganyago said. There was no discussion of a more aggressive 50 basis-point rate cut.

Despite the central bank’s broadly upbeat tone, Kganyago said that the growth outlook remained relatively constrained and that the policy-setting committee would prefer to see inflation expectations anchored closer to the midpoint of its target range.

Analysts said they were not expecting to see a flurry of further rate cuts.

Razia Khan, an Africa-focused economist at Standard Chartered, said: “We think that today’s 25 basis-point cut was probably it in terms of South Africa’s easing cycle”.

Moody’s said on Friday that it expected to see a strengthening of South Africa’s institutions under Ramaphosa which could translate into greater economic and fiscal strength.

S&P Global, another of the “big three” ratings agencies, said it wanted to see stronger per capita growth before it would consider raising its credit rating.


(Reporting by Olivia Kumwenda-Mtambo and Nomvelo Chalumbira; Writing by Alexander Winning; Editing by James Macharia and Hugh Lawson)

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Angola’s inflation slows to 32.58 percent year/year in May

Comments (0) Latest Updates from Reuters

LUANDA (Reuters) – Angola’s inflation slowed to 32.58 percent year-on-year in May from 34.8 percent in April, according to data on the national statistics agency’s website seen by Reuters on Monday.

Price increases on a month-on-month basis slowed 1.6 percent in May compared to a 1.8 percent previously.


(Writing by Olivia Kumwenda-Mtambo; Editing by James Macharia)


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Repo rate cut back on the cards for South Africa as inflation seen easing

Comments (0) Latest Updates from Reuters

By Vuyani Ndaba

JOHANNESBURG (Reuters) – South Africa’s economic growth will be much softer this year after the country slipped into recession in the first quarter, and with inflation easing an interest rate cut is back on the agenda, a Reuters poll found.

Africa’s most industrialised nation is expected to expand 0.7 percent in 2017, 0.2 percentage points slower than last month’s median as economists trimmed growth forecasts following South Africa’s first recession for eight years.

The median prediction for interest rates shows a cut is back in the forecast horizon – 25 basis points to 6.75 percent in January or March. Some economists have pencilled it in as early as July or September this year.

In March, the consensus was for the repo rate to be cut to 6.75 percent early next year but then President Jacob Zuma changed his finance minister for a fourth time, triggering debt downgrades and leading economists to push cuts off the horizon.

But a trimming is back on the cards and Mandla Maleka, chief economist at Eskom Treasury, said the cut could come earlier than 2018.

“It will be contingent on the persuasive improvement on domestic inflation and less volatile currency. Growth – much as it is not targeted by the Monetary Policy Committee – could be the game changer,” Maleka said.

After contracting 0.7 percent in the first quarter, the economy is expected to have rebounded and will expand 0.8 percent this quarter and 0.9 percent in the third.

In contrast to South Africa, the U.S Federal Reserve is widely expected to raise its interest rate this week due to a tightening labour market and may also provide more detail on its plans to shrink the mammoth bond portfolio it amassed to nurse the economic recovery.

South Africa’s Reserve Bank does not have the fire power of bond purchases like the U.S. Fed and only targets inflation, with an aim to keep it between a 3-6 percent range.

Consumer inflation slowed to 5.3 percent in May, and is expected to average 5.5 percent this year, a change to last month’s median of 5.7 percent.

Economists are worried that debt denominated in the heavily traded rand is in serious risk of being downgraded to “junk status” this year, ejecting it from crucial bond indexes that automatically invest in local bonds and prop up demand for the rand.

However, Thea Fourie, senior economist at IHS Markit, added that lower inflation and interest rate levels could support real incomes of households.

Fourie added South Africa’s growth environment was low partially due to very weak confidence, both for investors and consumers.

“This means big ticket spending plans are delayed,” she said.

The ruling African National Congress (ANC) is due to hold a conference at the end of June to review policy and make recommendations on amendments or new strategies. Investors hope that will address confidence issues.



(Editing by Alison Williams)

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South Sudan inflation surges to more than 600% in wake of conflict

Comments (0) Africa, Business, Latest Updates from Reuters

NAIROBI (Reuters) – South Sudan’s inflation more than doubled in July to reach an annual rate of 661.3 percent, its statistics office said on Monday, as the economy of the 5-year old nation continued to reel amid civil conflict.

The National Bureau of Statistics said in a statement that inflation jumped from 309.6 percent a month earlier due to rising food and non-alcoholic drinks prices. Prices rose 77.7 percent month-on-month in July.

Oil-producing South Sudan won independence from Sudan in 2011 but in December 2013 slid into a two-year civil war after a dispute between President Salva Kiir and his former deputy Riek Machar.

The economy has been battered, driving prices higher.

In June, U.N. agencies said up to 4.8 million people in South Sudan face severe food shortages, the highest level since a conflict began.


(Reporting by George Obulutsa; Editing by Toby Chopra)

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Morocco annual inflation rises to 2.3% in June

Comments (0) Business, Latest Updates from Reuters, Middle East

RABAT (Reuters) – Morocco’s annual consumer price inflation rose to 2.3 percent in June from 1.9 percent in May, due to higher food prices, the High Planning Authority said on Friday.

Annual food inflation jumped to 4.4 percent from 3.6 percent in the previous month as June coincided with the holy fasting month of Ramadan. Non-food price inflation rose slightly to 0.6 percent in the 12 months to June from an annual 0.5 percent in May.

Transport costs fell 0.6 percent, but hotels and restaurants were 2.4 percent more expensive, the agency said without giving details.

On a month-on-month basis, the consumer price index eased to 0.4 percent in June, down from 0.5 percent in May as food price inflation was steady at 0.8 percent.


(Reporting By Aziz El Yaakoubi; Editing by Catherine Evans)

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Investors cheer Nigeria currency float but won’t rush back yet

Comments (0) Africa, Business, Latest Updates from Reuters

LONDON (Reuters) – Nigeria’s swift one-step move to a floating currency has been welcomed by investors but most nonetheless will stay away until Africa’s biggest economy shows signs of recovering from damage inflicted by the 16-month old exchange rate peg.

Nigeria this week finally ditched the peg that had throttled foreign exchange markets, led to widespread capital flight and caused its first quarterly economic contraction since the 1990s.

Investors, local businesses and international lenders had called for a devaluation for months as the government burned through hard currency reserves to preserve the naira after a steep oil price tumble tore apart its finances.

But while investors welcomed the float as the right first step, most plan to watch Nigeria from the sidelines anticipating more pain in store.

“It is positive, it is a more credible and flexible exchange rate regime in the long-run, you will see an external rebalancing of the economy, a fiscal adjustment and so on,” said Jonas David, emerging market specialist at UBS Wealth Management in Zurich.

“But in the near term, things will get worse before they get better.”

A slide into recession after the economy shrank in the first quarter of the year and a fresh spike in inflation are among issues investors will want to wait out, said David, together with confirmation that the new regime is functioning properly.

Once that happens, focus will shift to fundamentals such as returning the economy to growth – key for a country of 180 million where some 46 percent live in poverty.

Inflation too is running at the highest in more than six years – it hit 15.6 percent in May – already above the central bank’s 12 percent interest rate.

The currency devaluation is likely to push inflation north of 20 percent in the second half of the year, meaning authorities will need to ramp up interest rates if they want to lure back foreign money to bond markets.

“Right now you have negative real interest rates, so investors will not be enamoured with buying Nigerian bonds given where inflation is or where it is headed,” said Kevin Daly at Aberdeen Asset Management. “You need (a yield) somewhere between 15-20 percent to make this attractive.”



Foreigners held $5.4 billion of Nigerian bonds in September 2013 but dumped most of them after the country was ejected last year from JPMorgan’s GBI-EM index – the most widely used emerging debt benchmark.

A country cut from the index needs to wait at least 12 months before re-inclusion.

But the bond market’s size, liquidity and turnover all made it attractive to foreign investors, said Samir Gadio, Head of Africa Strategy FICC Research at Standard Chartered Bank, noting that Lagos’ $150 million daily turnover was next only to South Africa’s on the continent.

Nigeria’s bourse has avoided the same fate, as index provider MSCI has retained it in its frontier equity indexes with a sizeable 12.4 percent weight. But local stock exchange data shows foreigners’ share dealings are down 66 percent from a year earlier.

While the market has surged about 8 percent this month in anticipation of foreigners’ return, fund managers, eyeing an ominous combination of rampant inflation and slowing growth, may not rush back.

Africa’s biggest oil exporter saw its economy shrink by 0.36 percent – its worst performance in a quarter of a century – and economists predict the contraction deepened in the second quarter due to fuel and FX shortages.

“It will be at least 12 months before we see any green shoots,” said Yvonne Mhango, Sub-Saharan Africa Economist at Renaissance Capital in Johannesburg. “The pain has to cut in full through the economy.”

An average naira rate of 270 per dollar this year implies a fall in Nigeria’s dollar GDP to $400 billion from $481 billion in 2015, Renaissance Capital estimates.

All this is set to hit the local population and firms hard, but foreign companies operating in Nigeria have also suffered. Brewer Heineken for instance reported that consumers had been shifting to cheaper brands.

“(Naira devaluation) will lead to a consumer recession, a collapse in profits in companies,” said Robert Marshall-Lee, investment director at Newton Investment Management.

While Marshall-Lee predicts an “ugly market” for the next couple of years, he says stronger companies such as Guinness Nigeria, Nigerian Breweries or lenders Zenith Bank and Guaranty Trust Bank will probably weather the storm.

“When we see the market pricing the new reality and the stocks de-rate to reflect the new profit base, we will let that shake out happen. It might well over-correct which will give us an opportunity to buy.”


(By Karin Strohecker. Additional reporting by Sujata Rao in London and Chijioke Ohuocha in Lagos)

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South Africa’s rand steady, caution prevails ahead of British referendum

Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s rand pulled back from seven week highs against the dollar on Wednesday, with traders and analysts expecting caution to prevail on the eve of a British referendum on whether to remain in the European Union.

Domestic economic headlines have taken a backseat in moving the currency this week, although inflation data due out at 0800 GMT could boost it slightly if higher than expected, raising the prospect of higher interest rates this year.

At 0653 GMT the rand traded at 14.7290 to the dollar, not far off its previous close at 14.7350.

It was however down about 10 cents from Tuesday’s high of 14.6225, the rand’s strongest level since May 4 which came on the back of a rise in risk appetite as investors bet on Britain staying in the EU after Thursday’s vote.

“Optimism in financial markets ahead of the UK referendum has tempered ahead of the vote tomorrow,” Standard Bank said in a note.

Government bonds edged higher in early trade, with the yield for debt due in 2026 dipping 2 basis points to 8.97 percent.

The stock market’s Top-40 futures index was up 0.26 percent, signalling a slightly firmer start for the bourse at 0700 GMT.


(Reporting by Stella Mapenzauswa; Editing by Tiisetso Motsoeneng)

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Egypt’s Al Ahly Bank raises depositor rates after central bank hike

Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egyptian Bank Al Ahly raised interest rates for account holders, an official at the bank said on Monday, becoming the first state-owned commercial lender to react to last week’s increase in benchmark borrowing costs.

Al Ahly – National Bank of Egypt’s retail banking arm – raised rates on deposits by 0.75 percent and on saving accounts by 1 percent, the official told Reuters.

Two of Al Ahly’s main competitors, Banque Misr and Commercial International Bank, are also expected to review depositor rates on Monday, officials at both banks said.

On Thursday, the central bank raised benchmark rates by 100 basis points to their highest levels in years, accelerating efforts to rein in surging inflation and ease downward pressure on the Egyptian pound.



(Reporting by Ehab Farouk; Writing by Amina Ismail; editing by John Stonestreet)

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Burundi’s inflation slows to 2.6% in April yr/yr

Comments (0) Africa, Business, Latest Updates from Reuters

KIGALI (Reuters) – Burundi’s year-on-year inflation eased to 2.6 percent in April from 4.3 percent in March thanks to a significant fall in food costs, official data showed on Monday.

Food inflation in the year to April slowed to 2.5 percent from 6.4 percent in the previous month, the country’s Institute of Economic Studies and Statistics(ISTEEBU) said in a report.

Burundi has been grappling with unrest for more than a year, mainly in the capital Bujumbura. Western donors have suspended vital aid, leaving the poor nation more dependent on its modest coffee and tea exports and on domestic tax revenues.

Burundi’s economy shrank by 7.2 percent in 2015 and is expected to expand by 3.4 percent this year, the International Monetary Fund (IMF) said in a report.


(Reporting by Patrick Nduwimana; Editing by Edmund Blair and Gareth Jones)

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Zambia’s Lungu sees single-digit inflation, 2016 GDP growth of 3.7%

Comments (0) Africa, Business, Latest Updates from Reuters

LUSAKA (Reuters) – Zambian President Edgar Lungu said on Friday he expected inflation in Africa’s second-biggest copper producer, currently running at almost 22 percent, to slow to single digits “within months”.

Lungu, who faces a tough election challenge in August, also said in a televised press conference that economic growth was seen accelerating slightly in 2016 to 3.7 percent from 3.5 percent last year.


(Reporting by Chris Mfula; Writing by Ed Stoddard; Editing by James Macharia)

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