Africa-Press – Namibia. Ed Stoddard
THE South African Reserve Bank (Sarb) is set to increase rates once again this week. The only question is by how much.
Ed Stoddard
THE South African Reserve Bank (Sarb) is set to increase rates once again this week. The only question is by how much.
Domestic consumer inflation may or may not be peaking, but the reserve bank is not taking any chances.
It’s a given that its Monetary Policy Committee (MPC) will increase rates again on Thursday when its bi-monthly meeting wraps up.
A poll by finder.com of 18 economists, academics and property specialists was unanimous in its view that the Sarb will raise rates on Thursday.
Half of those polled see a 50 basis-point hike, 44% a 75 basis-point hike, with only one seeing a 25 basis-point move.
“Price stability remains the Sarb’s primary objective; policy will be forward-looking, and with increased pressure on the rand from accelerated DM [developed market] tightening, we expect the Sarb to deliver another 75 basis-point rate hike, as it did in July,” Razia Khan, the chief Africa economist at Standard Chartered Bank in London, said in a research note.
South African consumer inflation was running at 7,8% in July, a clear breach of the Sarb’s 3-6% target range, and is widely expected to race above 8%, though it remains to be seen whether it is peaking soon.
Falling oil prices over the past couple of months will at least help to slow it down. The August consumer price index (CPI) number will be released tomorrow.
“With July CPI printing 7,8%, and likely to rise above 8% for the duration of this year, in our view; and with the repo rate currently at 5,5%, the Sarb may not want to risk policy becoming even more accommodative in real terms,” Khan said.
One key concern for the Sarb is the rand, which is currently near over two-year lows above 17/US$.
The rand at the moment does not have a lot going for it. Aggressive interest rate hikes in developed economies to tame inflation are taking the shine off higher-yielding emerging market currencies, forcing central banks worldwide to follow suit.
Meanwhile, the prices of the mined commodities that South Africa exports have been cooling. One upshot of that was a current account surplus that unexpectedly slid into a deficit in the second quarter.
Dividend outflows were also a major factor on this front and the stream offshore is expected to continue.
The bottom line is that South Africa is exporting more capital than it is importing at the moment, which is never good for the rand.
Its lifeline of last resort is a credible, inflation-targeting central bank which does not hesitate to tighten or pursue “normalisation”, to use the jargon of the day. And the Sarb under no-nonsense governor Lesetja Kganyago fits that bill.
The overall economic and business environment in South Africa remains bleak. – Business Maverick
Domestic consumer inflation may or may not be peaking, but the reserve bank is not taking any chances.
It’s a given that its Monetary Policy Committee (MPC) will increase rates again on Thursday when its bi-monthly meeting wraps up.
A poll by finder.com of 18 economists, academics and property specialists was unanimous in its view that the Sarb will raise rates on Thursday.
Half of those polled see a 50 basis-point hike, 44% a 75 basis-point hike, with only one seeing a 25 basis-point move.
“Price stability remains the Sarb’s primary objective; policy will be forward-looking, and with increased pressure on the rand from accelerated DM [developed market] tightening, we expect the Sarb to deliver another 75 basis-point rate hike, as it did in July,” Razia Khan, the chief Africa economist at Standard Chartered Bank in London, said in a research note.
South African consumer inflation was running at 7,8% in July, a clear breach of the Sarb’s 3-6% target range, and is widely expected to race above 8%, though it remains to be seen whether it is peaking soon.
Falling oil prices over the past couple of months will at least help to slow it down. The August consumer price index (CPI) number will be released tomorrow.
“With July CPI printing 7,8%, and likely to rise above 8% for the duration of this year, in our view; and with the repo rate currently at 5,5%, the Sarb may not want to risk policy becoming even more accommodative in real terms,” Khan said.
One key concern for the Sarb is the rand, which is currently near over two-year lows above 17/US$.
The rand at the moment does not have a lot going for it. Aggressive interest rate hikes in developed economies to tame inflation are taking the shine off higher-yielding emerging market currencies, forcing central banks worldwide to follow suit.
Meanwhile, the prices of the mined commodities that South Africa exports have been cooling. One upshot of that was a current account surplus that unexpectedly slid into a deficit in the second quarter.
Dividend outflows were also a major factor on this front and the stream offshore is expected to continue.
The bottom line is that South Africa is exporting more capital than it is importing at the moment, which is never good for the rand.
Its lifeline of last resort is a credible, inflation-targeting central bank which does not hesitate to tighten or pursue “normalisation”, to use the jargon of the day. And the Sarb under no-nonsense governor Lesetja Kganyago fits that bill.
The overall economic and business environment in South Africa remains bleak.
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