The South African Reserve Bank will raise its benchmark interest rate by 50 basis points to 5.25% next Thursday as it tries to rein in quicker inflation, a Reuters poll found.
In a July 7-13 poll, 19 of 23 economists expected a half-point hike to 5.25%, with the other four forecasting a larger three-quarters of one percent increase.
The poll found a median 65% probability of a 50 basis point rise and 35% chance of 75 basis points.
“We expect the SARB to hike by 50 basis points in July and September before returning to 25 basis points increases afterwards,” said Johannes Khosa at Nedbank.
The poll also concluded the SARB would hike another 50 basis points again in September, with a pause until early 2023 when the bank was expected to hike another 50 basis points by end-March. The SARB meets in January and March.
The SARB has now hiked interest rates by a cumulative 125 basis points since November last year. At its last meeting two months ago it did so by 50 basis points for the first time since January 2016 to 4.75%.
South Africa’s consumer inflation quickened by more than expected to 6.5% year-on-year in May, breaching the central bank’s target range for the first time since 2017.
Economists project inflation to average 7.5% this quarter, before moderating gradually to 4.5% in the last quarter of next year, ushering in an interest rate cut in November 2023.
Still, inflation was expected to average 6.5% this year – above the SARB’s 3-6% target.
Khosa added global food and energy prices remain elevated in line with supply-demand imbalances that have been exacerbated by the Russia-Ukraine war and, to some extent, the zero COVID-19 policy in China.-investing.com
