West Africa Central Bank Holds Rates and Flags the Inflation Turn

West Africa’s Central Bank of West African States (BCEAO) maintained its interest rates unchanged during a meeting in Dakar on September 9, shifting its focus to the rising inflation issue instead. The eight member countries, which use the CFA franc, form the West African Economic and Monetary Union (UEMOA) and have pegged their currency to the euro.

The bank's monetary policy committee, responsible for setting rates, decided to keep the main policy rate at 3.00% and the marginal lending facility at 5.00%, both of which have remained unchanged since March 16, 2026. The reserve requirement also stayed at 3.00%.

Inflation, which had been falling for two years, began to rise again in 2026, reaching minus 0.2% in the first quarter and then moving to 0.4% in the second. Since then, it has accelerated, with 1.2% in July and 1.7% in August. The primary driver of this inflation surge is fuel costs resulting from higher fuel prices. Other factors include rising food prices such as housing, meat, fish, and vegetables.

The BCEAO anticipates inflation to average around 1% for 2026, after it was virtually zero in 2025, still comfortably within the union's 3% tolerance band.

The bank's cautious approach is based on its aim to protect the economic recovery first and closely monitor prices second. The economy of the UEMOA expanded by an estimated 6.0% in the second quarter, after growing by 6.1% in the first quarter, making it one of the fastest-growing regions globally. Exports and strong earnings from gold, cotton, cocoa, and oil have strengthened the union’s external position.

The bank's credit to the private sector also grew by 6.6% year-over-year in the year to June, up from 6.0% in the year to March.

BCEAO Governor Jean-Claude Kassi Brou defended the decision to hold rates steady, citing uncertainty and the need for steady indicators. The sole concern he mentioned is the potential crisis in the Middle East, which could further increase energy prices and push inflation above the forecast, forcing the bank to choose between growth and price stability.

For now, the committee's stance is that monetary conditions align with the current moment. The next critical test for the bank will be the autumn inflation readings, along with the developments in the oil market.