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<\/a><\/p>\nEven before Wednesday\u2019s inflation data, traders were fully pricing in a second consecutive half-point rate hike this week.<\/p>\n
Forward-rate agreements, used to speculate on borrowing costs, show investors are also pricing in an 80% chance of a 75-basis-point move and 200 basis points in total by year-end. Of 20 economists in a Bloomberg survey, 13 predict the monetary policy committee will raise the key rate by half a point this week, with the rest expecting a bigger increase.<\/p>\n
A three-quarter percentage point hike to 5.5% would be the biggest since September 2002, when the South African Reserve Bank lifted the benchmark repurchase rate by 100 basis points.<\/p>\n
Even Faster<\/strong><\/p>\n A weak rand that\u2019s likely to fuel imported inflation and expectations of a 75 basis-point rate hike by the US Federal Reserve this month \u201cmay raise the pressure on the South African Reserve Bank to tighten even faster,\u201d said Razia Khan, head of research for Africa and the Middle East at Standard Chartered Bank. Her base case is for a half-point increase this week.<\/p>\n The rate of price growth in June was stoked by high food and gasoline costs, even as the government temporarily reduced a fuel levy to contain increases in the retail price of petrol and the wholesale cost of diesel. The measure is likely to have delayed the peak in inflation.<\/p>\n The MPC prefers to anchor inflation expectations close to the 4.5% midpoint of its target range. It has already raised the key rate by a cumulative 125 basis points since November and signaled even higher borrowing costs ahead.<\/p>\n Heightened risks to economic growth – including flood damage in the province that\u2019s the second-biggest contributor to gross domestic product and deeper, more frequent power blackouts – the slowdown in economies of key trading partners and fears of a global recession will also influence decision-making.<\/p>\n
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