The upcoming decisions of the European Central Bank (ECB) regarding its key interest rates are being closely watched by the international financial ecosystem. This scrutiny is particularly crucial for the Central Bank of Central African States (BEAC) and the Central Bank of West African States (BCEAO), which manage currencies pegged to the euro at a fixed parity and have cooperation agreements with France.

Analysts and policymakers are discussing the possibility of the ECB lowering its key rates, with expectations that this move could begin as early as its June 2024 monetary policy committee meeting, potentially triggering a series of rate cuts throughout the Eurozone.

Historically, the BCEAO and the BEAC have often followed the ECB's decisions, partly due to the fixed parity linking their currencies to the euro, despite distinct economic contexts and fiscal policies.

The Eurozone currently faces increasing corporate and sovereign debt, while households, restrained by high rates, are reducing consumption typically funded by credit.

Potential Impacts for CEMAC and WAEMU

The ECB's decisions will directly affect the BEAC and the BCEAO, particularly regarding the remuneration of foreign exchange reserves. For the BEAC, which continues to deposit its reserves in the French Treasury's operations account, a decrease in ECB rates would reduce its revenues.

For the BCEAO, the impact on the markets will be critical. A reduction in ECB rates could lower the cost of credit, potentially stimulating borrowing by businesses, households, and governments. However, it could also decrease bond yields, thus reducing the remuneration of WAEMU's foreign exchange reserves.

Indirect Effects and Complexities

A reduction in ECB rates may lead to more complex indirect effects. In the CEMAC and the WAEMU zones, it could improve foreign currency liquidity. Although no scientific study has directly established a correlation, a rise in rates in the Eurozone has been followed by a decrease in commercial banks' net external assets in these regions.

This pressure on external liquidity has compelled the BEAC and the BCEAO to maintain high key rates to slow inflation, even as it decelerates, mainly due to insufficient food supplies and imported energy products influenced by global contexts.

The central banks of the CEMAC and WAEMU zones are considering and planning for these issues, but they do not always share their conclusions with other economic agents (businesses and households). This lack of clear communication complicates investors' visibility into short- and medium-term prospects.