The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) is set to increase the repo rate this week – with consensus among most analysts and economists that the hike will be larger than at previous meetings.
A Reuters poll on Friday showed that a majority of analysts surveyed expect the MPC to increase the pace of its interest rate hiking cycle, with a 50 basis point hike pencilled in, to 4.75%.“This is informed by the more hawkish interest stance adopted by the US central bank, as well as the stark and sustained move weaker in the rand exchange rate since mid-April,” it said. “The MPC is also likely to be concerned about recent above-inflation wage demands in both the public and private sector.
“We expect SA inflation to rise above the SARB’s upper target of 6.0% driven by fuel, electricity, food, and goods prices. Further, we expect global financial conditions to tighten faster resulting in a weaker USD/ZAR exchange rate, thus the SARB must normalise in line with the Fed and other major central banks,” he said.
Finder’s panel thinks the repo rate will end the year at 5.25% on average. The panel said inflation will likely hit 5.8% at the end of the year with panellists forecasting between a range of 4.5% and 6%.
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