{"id":728036,"date":"2023-10-30T11:03:06","date_gmt":"2023-10-30T09:03:06","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=728036"},"modified":"2023-10-30T11:04:19","modified_gmt":"2023-10-30T09:04:19","slug":"a-new-problem-for-interest-rates-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/728036\/a-new-problem-for-interest-rates-in-south-africa\/","title":{"rendered":"A new problem for interest rates in South Africa"},"content":{"rendered":"\n

South Africans have a tense wait ahead for the Reserve Bank’s Monetary Policy Committee (MPC) meeting in November – with the recent early resignation of SARB deputy governor Kuben Naidoo<\/strong><\/a> making the next move by the central bank even more uncertain.<\/p>\n\n\n\n

Views on the final MPC meeting of the year are split among various analysts and economists, with many seeing another interest rate hike as likely as a hold.<\/p>\n\n\n\n

The central bank\u2019s monetary policy committee has raised interest rates by 475 basis points to 8.25% in its current tightening cycle that started in November 2021 and paused at its last two meetings.<\/p>\n\n\n\n

While the MPC held rates at its last meeting in September, it was a close call, with three members voting to hold and two voting for another 25 basis point hike.<\/p>\n\n\n\n

According to economists at the Bureau for Economic Research (BER), with Naidoo’s early resignation, the MPC now has four members – and while this is enough for a quorum, it increases the likelihood of a deadlock.<\/strong><\/p>\n\n\n\n

“The departure of a deputy governor means the SARB\u2019s interest rate voting committee shrinks to four members. Although this is still a quorum, it does make the possibility of a deadlock on the MPC more likely, especially given that the last two policy interest rate calls to keep the repo rate unchanged were decided by a 3-2 split.<\/p>\n\n\n\n

“In a 2-2 split scenario when there are only four members, SARB Governor Lesetja Kganyago would cast the deciding vote,” the BER said.<\/p>\n\n\n\n

This presents a greater risk for another interest rate hike, as Kganyago is widely seen as a hawk (keenly focused on keeping inflation low) compared to Naidoo’s dove (which tends to support low interest rates and an expansionary monetary policy).<\/p>\n\n\n\n

If it comes down to the governor having the final say, the scales might tip toward a hike.<\/p>\n\n\n\n

Warnings abound<\/strong><\/p>\n\n\n\n

Warnings have already started seeping in that South Africans should start tempering expectations about future rates.<\/p>\n\n\n\n

SARB deputy governor Fundi Tshazibana said last week there are still too many risks to the inflation outlook to declare that the cycle of interest rate increases is over.<\/p>\n\n\n\n

\u201cWhile many in the public domain are trying to get us to say the hiking cycle is over, as I said, there are too many risks on the horizon for us to pronounce on it,\u201d she said.<\/p>\n\n\n\n

Annual inflation has remained above the midpoint of the Reserve Bank\u2019s target range of 3% to 6% \u2014 where it prefers to anchor expectations \u2014 since May 2021. It accelerated to 5.4% in September because of higher energy and food prices.<\/p>\n\n\n\n

Meanwhile, surveys have shown that expectations for interest rates in the country among fund managers have also shifted.<\/p>\n\n\n\n

While investors still believe that interest rates will be held at current levels, they do expect the anticipated cutting cycle to kick in much later – only coming after the second quarter of the year.<\/p>\n\n\n\n

More positively, economists are at least certain that the cutting cycle will come, and when it does, the MPC is expected to cut at least 75 basis points in 2024.<\/strong><\/p>\n\n\n\n

The MPC will announce its next rate decision at its final meeting of the year scheduled for 21 to 23 November 2023.<\/p>\n\n\n\n

\n\n\n\n

Read: Reserve Bank Deputy Governor warns of possible interest rate hike<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

New developments at the South African Reserve Bank have added a layer of uncertainty to the next move for interest rates in the country.<\/p>\n","protected":false},"author":10,"featured_media":668661,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-728036","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/728036","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=728036"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/728036\/revisions"}],"predecessor-version":[{"id":728052,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/728036\/revisions\/728052"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/668661"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=728036"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=728036"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=728036"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}