Leading economists weigh in with their predictions for the Reserve Bank’s next interest rate move.
Most economists and investment specialists expect another interest rate hike from the South African Reserve Bank when its Monetary Policy Committee meets next month.
Recent consumer price inflation data for March showed this goal slipping away, as CPI accelerated to 7.1% and food inflation reached a 14-year high. “We also think that the bank is concerned over growing uncertainties in the exogenous environment , which it worries could ‘raise the risk profile of emerging markets’, capital outflows and weaker currency performance.”
However, Roodt noted that while monetary policy is moderately restrictive as it dampens demand, fiscal policy is highly expansionary. This means the Finance Minister and the SARB are “pulling in opposite directions”.FNB chief economist Mamello Matikinca-Ngwenya said she expects the SARB MPC to hold and keep the repo and prime lending rates unchanged.
Payi said inflation is also likely to stay high, as pressure on the upside is still there, given elevated oil prices after some oil-producing countries decided to cut production. “This is due to the range of negative economic data we have seen for February 2023: Manufacturing production -5,2 year-on-year and -1.3 month-on-month; retail sales -0.5% year-on-year and -0.1 month-on-month; motor sales -1.5 year-on-year; and wholesale trade sales -1.9% year-on-year.”
Matrix Fund Managers fixed income portfolio manager Lourens Pretorius said the SARB’s aggressive rate hike in March leaves monetary policy at arguably restrictive levels compared to the reserve bank’s Quarterly Projection Model. The recent March headline inflation reading has also surprised marginally to the upside at 7.1%, with a broadening of inflation pressures evident and food inflation being a dominant driver.
Pretorius also expects some mild accommodation back to 7.0% once the re-anchoring of inflation is achieved.Chief economist at Sanlam Investments Arthur Kamp said the SARB’s MPC is concerned about high inflation expectations, tight global financial conditions, and the risk of the rand weakening against the backdrop of US monetary policy tightening.
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