Raising interest rates will not stabilize African inflation
Inflation is being driven by events beyond Africa’s control, which have raised the prices of goods from abroad (File/AFP)
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African economies began this year facing no shortage of challenges, including lower global demand for their goods and services, unpredictable tariffs and other trade barriers, post-pandemic debt overhangs, structural unemployment and large net financial outflows. Then the US and Israel launched their war on Iran, throwing the Middle East into turmoil, halting traffic through the Strait of Hormuz and compounding inflationary pressures. Now, inflation has reached double-digit rates in some African countries. But the traditional monetary policy prescription — higher interest rates — will not work to contain it and might even make matters worse.
