South Africans should expect higher interest rates this week.
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SOURCE: BUSINESSTECH] The South African Reserve Bank is likely to hike interest rates by a further 25 basis points this week to 4.25% in an attempt to slow inflation, say economists.
A Reuters poll of economists said prices could rise faster than they had expected before Russia’s invasion of Ukraine. Fifteen of 19 economists polled in the last week predicted the repo rate would rise by 25 basis points to 4.25% on March 24, while the remaining four said it would be left unchanged.
“The decision, statement, and tone are likely to strike a more hawkish note, though at the same time, acknowledge a high degree of uncertainty,” said Jeff Schultz – senior economist at BNP Paribas South Africa.
He said that higher inflation projections and adjustments to the interest rate gap model – due to higher rate hike assumptions – means that the central bank’s quarterly projection model is very likely to imply a faster pace of hikes compared to its January estimates.
“Though a 50bp hike is unlikely to be delivered, we do not rule this out from May, depending on the evolution of oil and food prices and their imminent second-round impacts on expectations,” Schultz cautioned.
“While the decision itself is unlikely to come as a surprise, we think the statement and quarterly projection model outputs are likely to be closely scrutinised for signs of a central bank becoming increasingly uncomfortable with the inflation outlook with deeper negative real rates likely to ensure over the coming quarters,” he said.
A Reuters poll of economists said prices could rise faster than they had expected before Russia’s invasion of Ukraine. Fifteen of 19 economists polled in the last week predicted the repo rate would rise by 25 basis points to 4.25% on March 24, while the remaining four said it would be left unchanged.
“The decision, statement, and tone are likely to strike a more hawkish note, though at the same time, acknowledge a high degree of uncertainty,” said Jeff Schultz – senior economist at BNP Paribas South Africa.
He said that higher inflation projections and adjustments to the interest rate gap model – due to higher rate hike assumptions – means that the central bank’s quarterly projection model is very likely to imply a faster pace of hikes compared to its January estimates.
“Though a 50bp hike is unlikely to be delivered, we do not rule this out from May, depending on the evolution of oil and food prices and their imminent second-round impacts on expectations,” Schultz cautioned.
“While the decision itself is unlikely to come as a surprise, we think the statement and quarterly projection model outputs are likely to be closely scrutinised for signs of a central bank becoming increasingly uncomfortable with the inflation outlook with deeper negative real rates likely to ensure over the coming quarters,” he said.
