SA Reserve Bank’s Monetary Policy Committee (MPC) will sit down on Thursday, 24 November to discuss the country’s final rate hike decision for the year. Experts believe the bank will hike rates by 75 basis points (bps) or higher.
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Chart of cumulative interest rate increases since January 2022 for a selected sample of emerging markets.
As reported by Business Insider, Annabel Bishop, the chief economist at Investec, believes that the MPC should increase the repo rate by 100 bps (1%). Bishop sees a possibility that the increase may even be higher as the South African Reserve Bank (SARB) tries to keep up with the rate hikes by the Federal Open Market Committee (FOMC).
Bishop adds, “By the end of the year, the FOMC will likely have hiked rates by 5.50% in the current cycle and SA by 4.75%, with the MPC likely to discuss a larger hike than 100 bps in November, particularly given the higher end rate now signalled by the FOMC, and so could surprise on the upside.”
“A narrowing interest rate differential between the US and SA leads to rand weakness against the US dollar.”
Oxford Economics economist Jee-A van der Linde says the SARB should increase the rate by 75 bps in order to slow inflation.
Van der Linde said, “Assuming a slow pace of disinflation ahead, we forecast a 75 bps increase in the November meeting followed by an additional 50 bps rise in the policy rate in Q1 2023, which will see the repo rate reach 7.5%.”
A poll found that 90% of participating economists, academics, and analysts believe a rate hike is on the way.
Half of the experts believe the bank will hike rates by 75 bps, with at least one anticipating a jump of 100 bps. Two expect a hike of just 25 bps, two expect a hold, and the balance anticipates a 50 bps hike.
The panel unanimously agreed that the rate will peak sometime next year, settling between 7.0% and 7.5%.
Dawie Roodt, chief economist for Efficient Group, expects that the rate will peak at 8% in March 2023 but predicts rate cuts in 2024.
Roodt said, “The sooner we get this over, the less we would need to do. When you go through hell, don’t crawl.”
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Picture: SA Reserve Bank
