Reserve Bank expected to stick to modest interest rate cut despite Fed moves
The SA Reserve Bank will likely lower interest rates by 25 basis points on Thursday, despite a larger-than-expected overnight move by the Federal Reserve as it turns the screws on inflation.
"We find this to be improbable," Keabetswe Mojapelo and Manqoba Madinane said in a note in which they reiterated their view of a quarter-point reduction."The SARB has highlighted that real rates in South Africa are already low and do not offer the same buffer as in other emerging markets, limiting their capacity for aggressive cuts."South Africa’s real rates have reached the highest level in 19 years after price pressures cooled. Data on Wednesday showed annual slowed to 4.
Price pressures, for the first time in more than three years, have now moved below the midpoint of the central bank’s 3% to 6% target band where it prefers to peg expectations. But policymakers have been disappointed before by the failure of inflation to cool as forecast and are expected to be cautious, at least as they get the easing cycle underway.
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