Online Reporter
Economists are divided over whether the South African Reserve Bank will keep interest rates unchanged or extend its current easing cycle when policymakers meet for the first time since deciding to anchor inflation at 3 percent.
While lower-than-expected inflation and easing expectations support the case for a rate cut, the central bank’s July decision to anchor inflation at the bottom of its 3 percent–to-6 percent target range — rather than the midpoint, has made the call more complex.
Citigroup Inc., RMB, Morgan Stanley and Barclays Plc’s analysts are among the 15 in a Bloomberg survey expecting Governor Lesetja Kganyago to leave the key rate at 7 percent when he delivers the announcement shortly after 3 pm on Thursday at a press briefing in Pretoria.
BNP Paribas, Goldman Sachs and Standard Chartered’s economists are among the eight anticipating a quarter-point cut.
“We see a strong economic case for monetary easing in both the near term and medium term, given the benign inflation outlook as well as declining inflation expectations,” Goldman Sachs economist Andrew Matheny said.
Annual inflation eased to 3,3 percent in August from 3,5 percent a month earlier, data published Wednesday showed. Expectations, a key measure used by the central bank to guide its monetary decisions, have fallen to a 20-year low.
The current moment presents a window of opportunity for the SARB to cut rates, said Standard Chartered’s Razia Khan, who had previously expected a hold before the better-than-expected consumer price data.
Still, a cut cannot be guaranteed. “With inflation rising from the SARB’s preferred 3 percent anchor, our base view is that the MPC will leave interest rates unchanged,” said Nedbank Group Ltd.’s Busisiwe Nkonki and Matimba Khosa.
Yvonne Mhango, Africa Economist for Bloomberg Economics, expects inflation to quicken to 4,2 percent by year end and remain there through 2026. — Moneyweb
