No SARB rate hike expectedSARB expected to leave repo rate unchanged Economists expect a dovish statement as the bank gets closer to its easing cycle. South Africa’s Reserve Bank is expected to leave interest rates unchanged at its 20 July meeting, according to a Reuters poll released on Monday, but economists expect a dovish statement as the bank gets closer to its easing cycle.Twenty-four of 27 economists said the reserve bank will hold rates at 7% on Thursday. Two predicted a 25-basis-point cut and one expects the repo rate to be cut by half a percent.
Economic growth in South Africa will be weaker this year after the country slipped into recession in the first quarter, and with inflation easing an interest rate cut is expected in the first quarter of next year.
“While our consumer price index view indicates that the SARB has room to ease rates from as early as next week, it will first look to change its inflation rates narrative before pulling the trigger,” said Jeffrey Schultz, an economist at BNP Paribas.
Schultz said at least two members of the Monetary Policy Committee could vote in favour of a 25-basis-point cut next Thursday. At its May meeting, only one of the six committee members voted for a cut.
“This should send a signal that September is a ‘live’ meeting,” he said.
At 5.4% in May, inflation has been slowing after a drought last year and will probably average 5.4% this year and 5.3% next year.
NAMPA/REUTERS