The South African Reserve Bank has divided opinion over whether it will cut interest rates again on Thursday or stay on hold to reinforce its commitment to its 3% inflation target.<\/p>\n\n\n\n
Economists were narrowly split, with 13 in a Bloomberg survey expecting Governor Lesetja Kganyago\u2019s monetary policy committee to keep the benchmark rate at 6.75, while 11 anticipated a 25-basis-point reduction.<\/p>\n\n\n\n
Traders were also divided. Forward-rate agreements used to speculate on borrowing costs implied a 52% chance of a 25-basis-point cut. <\/p>\n\n\n\n
For the year as a whole, markets priced in 57 basis points of easing, up from 50 basis points a week earlier.<\/p>\n\n\n\n
Economists in a separate survey see the six-member panel split over the decision, with four expected to back a hold and two favouring a quarter-point reduction.<\/p>\n\n\n\n
The decision, expected after 15h00 in Pretoria, will be the second since Finance Minister Enoch Godongwana formally endorsed the lower 3% inflation target, and comes as he prepares the annual budget, which will show whether spending increases are aligned with the new goal.<\/p>\n\n\n\n
Patrick Buthelezi at Sanlam Investments expects the bank to cut. <\/p>\n\n\n\n
But he said a more prudent approach might be to hold back until after the Feb. 25 budget, while also waiting for clarity on the path of administered prices and electricity tariffs.<\/p>\n\n\n\n
\u201cI would wait a bit and cut a bit later,\u201d Buthelezi said, citing the budget and the latest inflation figures for December, which showed a slight uptick to 3.6%.<\/p>\n\n\n\n
\u201cIf you want to anchor inflation at 3%, you will allow restrictive monetary policy,\u201d he said. \u201cThey\u2019ll be divided on this decision; I don\u2019t know which group will win that discussion.\u201d<\/p>\n\n\n\n
Others also expect a close call between those favouring a hike and those favouring a hold.<\/p>\n\n\n\n
\u201cMaybe they want to settle expectations around the target; they\u2019re not there yet,\u201d said Johann Els, chief economist for PSG Financial Services, who also expects a 25 basis points reduction. Though inflation expectations have cooled to 3.7%, they remain above the new target.<\/p>\n\n\n\n
But \u201cthe combination of a lower forecast, a stronger rand, lower inflation expectations; I think we can see two or three rate cuts of 25 basis points each this year,\u201d Els said.<\/p>\n\n\n\n
The rand has rallied almost 8% against the dollar since the central bank\u2019s November meeting, leaving it significantly stronger than policymakers had projected at the time. <\/p>\n\n\n\n
That should help mute inflationary pressures by lowering import prices, and, as a result, the SARB is expected to lower its inflation forecast for this year.<\/p>\n\n\n\n
On the other hand, potential downward revisions to medium-term inflation estimates may be partly offset by stronger growth expectations, prompting the MPC to deliver a dovish hold, BNP Paribas\u2019 Jeffrey Schultz and Lior Kohanan wrote in a note.<\/p>\n\n\n\n
\u201cWe maintain that a majority on the MPC favours a more patient approach to policy recalibration under the SARB\u2019s new 3% inflation target,\u201d they said. \u201cWe stick to our call for a quarterly pace of 25 basis point cuts in 2026 and a terminal rate of 6% reached by the end of the third quarter.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The South African Reserve Bank has divided opinion over whether it will cut interest rates again on Thursday or stay on hold to reinforce its commitment to its 3% inflation target.<\/p>\n","protected":false},"author":59,"featured_media":767579,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[11019,3619],"class_list":["post-849235","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-mpc","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/849235","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=849235"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/849235\/revisions"}],"predecessor-version":[{"id":849238,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/849235\/revisions\/849238"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/767579"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=849235"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=849235"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=849235"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}