Yet at the same time, a slowdown in economic growth – at least in the event that it is demand-driven and results in a negative output gap – means that the central bank has to be mindful not to exacerbate the cyclical moderation by unduly tightening monetary policy.
Procyclical monetary tightening can negatively impact on economic growth and employment, and over time could contribute to financial instability. It is worth noting that the nature of the inflation pressures faced by African central banks may itself be changing.