Consumers should brace themselves for yet another interest rate hike when the South African Reserve Bank (SARB) Monetary Pricing Committee meets on Thursday, economists have warned.
According to the Bureau for Economic Research’s (BER) latest Weekly Review, economists have forecast an interest rate hike of at least another 25 basis points.
“The SARB is expected to hike the repo rate by 25 basis points, which would be the third consecutive rate hike. This is also our expectation, although a 50 basis points hike should not be ruled out completely,” the BER said.
“Outside of the rate call it will be interesting to see how the SARB sees the war in Ukraine influencing SA and the inflation trajectory going forward,” said the BER.
Stats SA will release the February consumer inflation data on Wednesday, which the Bureau anticipates will come in at 5.7% year-on-year, unchanged from January, although the Bloomberg consensus is that inflation will hit 5.8%.
President Cyril Ramaphosa is also expected to address the nation soon to provide guidance on how the government is planning to manage regulations relating to Covid-19 once the state of disaster is finally lifted.
This is after it was once again extended by a month to April 15, last week.
South Africa’s forecast interest rate hike will follow the US, which started its interest rate normalisation cycle when the US Federal Open Market Committee (FOMC) recently announced an increase in the policy interest rate from 0.25% to 0.5% as expected.
“This was the first increase since the FOMC slashed the rate aggressively at the start of the Covid-19 pandemic two years ago. The committee anticipates that ongoing increases will be appropriate. Officials of the Federal Reserve project that the policy rate will increase to 2% by the end of this year,” the BER said.
The March interest rate hike was supported by stronger economic activity and employment, while US inflation remains at multi-decade highs due to continued supply and demand imbalances, higher energy prices and broader price pressures.
In London, the Bank of England (BoE) raised its key rate for the third consecutive time, from 0.5% to 0.75%. The rate is now back to the level it was just before the onset of the pandemic.
“The BoE expects that inflation will breach 8% later this year, and therefore some further modest tightening of policy will be needed.
“In the opening of its monetary statement, the bank warned that the Russian invasion was likely to accentuate both the peak in inflation and intensify the squeeze on household incomes,” the BER said.
