{"id":60948,"date":"2024-02-13T17:31:10","date_gmt":"2024-02-13T17:31:10","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa"},"modified":"2024-02-13T19:16:42","modified_gmt":"2024-02-13T19:16:42","slug":"interest-rate-pain-wont-go-away-in-south-africa","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa","title":{"rendered":"Interest rate pain won\u2019t go away in South Africa"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>The South African Reserve Bank (SARB) is expected to start cutting interest rates this year \u2013 but the size of these cuts will be minimal compared to rapid increases over the last few years.<\/p>\n

Over 2023 alone, the SARB increased the repo rate from 7.00% to a 14-year high of 8.25%.<\/p>\n

Speaking at the first Monetary Policy Committee (MPC) meeting of 2024, the governor of the SARB, Lesetja Kganyago, expressed his worry over the serious upside risks to inflation, even if the committee unanimously voted to keep the repo rate unchanged.<\/p>\n

Kganyago\u2019s primary concern lies in the high and unpredictable local food market. For instance, the egg market was severely impacted by the outbreak of Avian bird flu and slow progress in local hen vaccinations.<\/p>\n

Allan Gray\u2019s Thalia Petousis said that food inflation is incredibly difficult to predict, but the group believes that the upside risks are less raised than in 2022 and 2023.<\/p>\n

Food inflation in 2024 will be compared to high base prices, while South Africa has so far been unscathed by the El Nino weather cycle \u2013 which often leads to drier conditions in Southern Africa.<\/p>\n

Kganyago also remains concerned over the damage that load shedding and the logistical constraints at the nation\u2019s port and rails could have on inflation.<\/p>\n

\u201cWhile these constraints have the capacity to continue to raise the local cost of production, the caveat is that the damage should be more muted than that caused during the peak Stage 6 load shedding of 2023,\u201d Petousis said.<\/p>\n

\u201cManagement changes at Transnet might also herald a greater willingness to accept private sector involvement to solve the logistics crisis.\u201d<\/p>\n

Looking globally, the strong US labour market (unemployment is at its lowest level in decades) and high wage growth could lead to a second round of inflation due to the robust demand for services and goods.<\/p>\n

The geopolitical tensions, such as the Red Sea attacks, also affect travel times, with many rerouting across the tip of Africa. This represents a transitory upside risk to the inflation forecast if the supply of finished goods dwindles or becomes more costly.<\/p>\n

Not ideal<\/p>\n

Members of the SARB have previously stated that keeping interest rates high is not ideal but necessary as the bank carries an oversized burden when stabilising South Africa\u2019s macro economy and inflation.<\/p>\n

The SARB has called on the government to share this burden through prudent fiscal policy, as lower interest rates and lower inflation cannot be achieved with the government running an imprudently high debt level, raising the country\u2019s risk premium.<\/p>\n

\u201cThis country risk premium also contributes to a weaker rand exchange rate and consequently higher imported price inflation,\u201d Petousis said.<\/p>\n

\u201cBeyond actively lowering their debt pile, the SARB also continues to recommend to the government that it lowers inflation by increasing the supply of energy and reducing real government wage growth so that it matches the weak economic productivity gains in our economy.\u201d<\/p>\n

\u201cThe SARB\u2019s final bugbear is that administered prices, such as those for electricity, water, and rates and taxes, have been allowed to rise at double digits and faster than the country\u2019s targeted price inflation.\u201d<\/p>\n

That said, the market is expecting the SARB to start cutting rates by mid-2024, which aligns with the SARB\u2019s quarterly projection model.<\/p>\n

The SARB\u2019s model predicts a short and shallow cutting cycle, with the repo rate dropping from 8.25% to 7.3% by the end of 2025.<\/p>\n

This is still 100 basis points higher than the pre-pandemic level.<\/p>\n

\u201cGiven the SARB\u2019s mandate to maintain price stability in the economy and given Kganyago\u2019s expectations for higher and stickier global inflation, a restrictive rate is seen as far more necessary than in the past,\u201d Petousis said.<\/p>\n

For More News And Analysis About South-Africa<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. The South African Reserve Bank (SARB) is expected to start cutting interest rates this year \u2013 but the size of these cuts will be minimal compared to rapid increases over the last few years. Over 2023 alone, the SARB increased the repo rate from 7.00% to a 14-year high of 8.25%. Speaking […]<\/p>\n","protected":false},"author":84,"featured_media":60946,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,7],"tags":[274,315,275],"class_list":["post-60948","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-head-lines","tag-africa-press","tag-africa-press-south-africa","tag-south-africa-2"],"yoast_head":"\nInterest rate pain won\u2019t go away in South Africa - South Africa<\/title>\n<meta name=\"description\" content=\"The South African Reserve Bank (SARB) is expected to start cutting interest rates this year \u2013 but the size of these cuts ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Interest rate pain won\u2019t go away in South Africa\" \/>\n<meta property=\"og:description\" content=\"The South African Reserve Bank (SARB) is expected to start cutting interest rates this year \u2013 but the size of these cuts ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2024-02-13T17:31:10+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-02-13T19:16:42+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2024\/02\/sm_1707839130.345116.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"683\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Interest rate pain won\u2019t go away in South Africa\",\"datePublished\":\"2024-02-13T17:31:10+00:00\",\"dateModified\":\"2024-02-13T19:16:42+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa\"},\"wordCount\":631,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2024\/02\/sm_1707839130.345116.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-South-Africa\",\"South-Africa\"],\"articleSection\":[\"all news\",\"economy\",\"head lines\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/interest-rate-pain-wont-go-away-in-south-africa\",\"name\":\"Interest rate pain won\u2019t go away in South Africa - 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