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Friday, September 20, 2019 / 03:00PM
/ United Capital Research
Lately, global central banks are becoming increasingly accommodative with fears of a global economic slowdown gaining momentum. First, the European Central Bank (ECB) delivered its first rate cut in 2019, easing policy rate from -0.4% to -0.5%, and relaunched its bond-buying program in order to support the Eurozone's faltering economy. Similarly, the U.S Federal Open Market Committee delivered its second 25bps rate cut in less than 2months.
In Africa, the two biggest economies in the Sub-Sharan Africa region, Nigeria and South Africa, despite battling with sluggish growth, seemed reluctant to join the second round of the easing exercise. For South Africa, oil market volatility and its direct impact on energy prices continue to pressure headline inflation, thus, compelling the reserve bank to hold its key policy rate unchanged at 6.5% on Thursday, 19th Sept. 2019. Similarly, Nigerian MPC which is currently holding its policy meeting is broadly expected to keep rates unchanged but for a different reason. Nigeria's need to continue to attract Foreign Portfolio Inflows to ease pressure on the exchange rate is seen as a major concern amid increasing uncertainty in the global space.
While
both economies are in dire need of faster output growth, the current structure
of both markets constrains the likelihood of a more accommodative monetary
policy in the absence of reforms.
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