African central banks return to rate hikes as fuel costs, currency pressures mount

….Egypt, Uganda and Namibia raise interest rates by a combined 350 basis points in October, signalling renewed inflation concerns across the continent.

African central banks are returning to monetary tightening as Egypt, Uganda and Namibia raised interest rates by a combined 350 basis points in October, reversing earlier policy pauses amid rising fuel costs, currency pressures and renewed inflation risks.

The three countries join South Africa and Rwanda, which also increased policy rates in the second half of 2026, highlighting a shift from the easing and rate-holding cycle that characterised monetary policy across several African economies earlier in the year.

However, the continent’s monetary policy direction remains divided. Ethiopia, Africa’s second-most populous country, which raised its benchmark interest rate by 100 basis points to 16 percent in July for the first time in two years, retained the rate on Tuesday as inflationary pressures continued to ease.

The latest increases underscore the difficult choices facing policymakers as higher energy prices threaten to reverse inflation gains, while businesses and households continue to contend with elevated borrowing costs.

BusinessDay had earlier reported that Africa’s interest-rate cutting cycle faced renewed pressure from rising oil prices and the threat of an intense El Niño weather event, which could disrupt agricultural production and push food prices higher.

These risks are now becoming more pronounced as central banks attempt to balance price stability, currency protection and economic growth.

Since March, the US-Israel war with Iran has intensified geopolitical uncertainty, contributing to volatility in global oil markets. Supply concerns surrounding the Strait of Hormuz, escalating tensions in the Middle East and declining global oil inventories have added to upward pressure on crude prices.

Brent crude rose to between $113.4 and $117.6 per barrel in late October, representing an increase of approximately 10.9 to 13.6 percent during the month. Prices subsequently fell below $100 per barrel on Thursday, highlighting continued volatility in the market.

For African economies dependent on imported petroleum products, higher crude prices translate into increased transport, production and distribution costs, potentially feeding into consumer inflation and weakening local currencies.

Frank Blackmore, lead economist at KPMG South Africa, said many economies had initially expected the disruption to energy markets to be short-lived.

“However, it is becoming increasingly clear that the geopolitical balance in the Middle East could sustain energy price volatility for a longer period,” he said.

In an interview with BusinessDay, Blackmore said the disruption had increased the cost of living and doing business across several economies, particularly through higher diesel, petrol and other energy costs.

“Oil-exporting countries may benefit from increased revenues, but that does not shield their consumers and businesses from higher prices. In West Africa, for instance, countries have come from a period of significantly higher inflation, with rates reaching about 30 percent in some cases before declining to around 14 percent,” he said.

According to Blackmore, higher petrol and energy prices could slow the disinflation process, although he expects the downward trend in inflation to continue.

“In East and Southern Africa, however, we could see greater inflationary pressure and potentially more interest rate increases as a result of higher petroleum prices. Some Southern African governments are responding by temporarily reducing the levies imposed on fuel prices. This provides some relief to consumers by slowing the rate at which fuel prices increase and, consequently, limiting inflationary pressures,” he said.

However, KPMG noted that temporary fuel tax reductions would not provide a lasting solution. Longer-term measures would require adequate refining capacity within Africa and more efficient logistics networks to move crude oil, petroleum products and other energy resources across the continent at lower costs.

These investments could help reduce exposure to external supply disruptions and improve the stability of energy prices.