The South African Reserve Bank is set to look past a smaller-than-expected rise in prices last month and keep borrowing costs unchanged while it assesses the impact that US President Donald Trump\u2019s trade policies will have on inflation.<\/p>\n\n\n\n
Most economists polled by Bloomberg foresee Governor Lesetja Kganyago holding the benchmark interest rate at 7.5% after three consecutive quarter-point cuts when he delivers the monetary policy committee\u2019s decision at a briefing north of Johannesburg shortly after 15h00 on Thursday. <\/p>\n\n\n\n
They expect the decision to be a close call, with four MPC members backing a hold and two a cut, according to a separate survey.<\/p>\n\n\n\n
While there are strong reasons for the MPC to reduce borrowing costs, including a struggling economy and the inflation rate remaining steady at 3.2% in February \u2014 and coming in slightly lower than the 3.4% economists expected \u2014 \u201cglobal factors will weigh more\u201d and cause policymakers to wait for the \u201cdust to settle,\u201d said Patrick Buthelezi, economist at Sanlam Investment.<\/p>\n\n\n\n
\u201cI think they\u2019ll probably pause for now,\u201d he said. He expects policymakers to be concerned that the US Federal Reserve, which stood pat on Wednesday, may alter course and raise interest rates because of the impact tariffs could have on inflation<\/strong>.<\/p>\n\n\n\n Since US President Donald Trump\u2019s re-ascension to the White House in January, he has been steadfast in imposing tariffs on neighbors, allies and competitors alike. He has also warned that he will institute reciprocal charges on trading partners on April 2.<\/p>\n\n\n\n His policies have led long-term inflation expectations to jump by the most since 1993.<\/p>\n\n\n\n A Fed hike to mitigate against the effect of the tariffs may trigger the South African Reserve Bank to follow suit<\/strong>, Buthelezi cautioned. \u201cThe SARB, unfortunately, will have to respond, because the currency would weaken in that environment.\u201d<\/p>\n\n\n\n The central bank will likely argue that the balance of risks remain tilted to the upside, \u201cin the context of a trade war, volatility risk,\u201d said Investec Bank Ltd. Treasury Economist and Fixed Income Analyst Tertia Jacobs.<\/p>\n\n\n\n This will be despite the MPC being able to reason that there are new disinflationary forces emerging, given the rand\u2019s performance, and softer oil prices, she said.<\/p>\n\n\n\n Another factor that may persuade the MPC to pause is South Africa\u2019s souring relations with the US. Some fear it could cause it to lose its preferential status under the African Growth and Opportunity Act, a trade accord covering about $3.6 billion of its exports to America.<\/p>\n\n\n\n Such concerns have led institutional investors including Franklin Resources Inc., JPMorgan Chase & Co. and Wells Fargo & Co. to dump South African bonds this quarter, fueling outflows at a rate not seen since before elections in May.<\/p>\n\n\n\n The central bank may also prefer to do nothing for now because of the uncertainty regarding the budget tabled on March 12, said Andrew Matheny, economist at Goldman Sachs Group Inc. <\/p>\n\n\n\n \u201cWhile we see a strong case for further monetary easing on the basis of dovish cyclical dynamics, we expect that budget uncertainty will prompt the SARB to keep rates unchanged.\u201d<\/p>\n\n\n\n The budget proposed a 0.5 percentage point increase in the value-added-tax rate in both of the next two fiscal years, but failed to get buy-in from the Democratic Alliance and other parties, and it\u2019s unclear if it will be passed in parliament. <\/p>\n\n\n\n The DA is the second-largest member of a collation government formed by the African National Congress after it lost its outright majority in the legislature last year.<\/p>\n\n\n\n The parties are holding a series of talks to resolve the impasse.<\/p>\n","protected":false},"excerpt":{"rendered":" Economists say the Reserve Bank is likely to err on the side of extreme caution today as it waits to see what happens to global interest rate trends, which might reverse.<\/p>\n","protected":false},"author":59,"featured_media":646203,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[10315,2924],"class_list":["post-817749","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-interest-rate","tag-reserve-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817749","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\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=817749"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817749\/revisions"}],"predecessor-version":[{"id":817750,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/817749\/revisions\/817750"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/646203"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=817749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=817749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=817749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}