S.Africa’s Reserve Bank seen keeping rates at 6.50 pct next week


Vuyani Ndaba
JOHANNESBURG (Reuters) – South Africa’s Reserve Bank will keep interest rates unchanged next week as an anticipated quicker rise in consumer prices over the coming months won’t drive inflation above target, a Reuters poll showed Wednesday.

All 25 economists surveyed in the past week predicted the central bank will hold rates at 6.50 percent at its May 24 meeting, which will follow last month’s losses by the rand and renewed weakness on Tuesday.

“They will probably hold steady, with the rand showing some vulnerability,” said Dennis Dykes, chief economist at Nedbank. “It illustrates the concerns that they have about the global situation.” However, he expected a reasonably neutral statement from Reserve Bank Governor Lesetja Kganyago.

The Bank cut its main interest rate to 6.50 percent in March, giving a boost to the economy, and is now expected to enter a prolonged period of inactivity, with no change forecast for the next 18 months at least.

“This current oil price is putting pressure on the inflation rate, especially if you consider the value-added tax (VAT) hike, we have seen the bottom or the best of inflation,” said Stanlib economist Kevin Lings.

In February the National Treasury announced a VAT increase for the first time in two decades, which could hurt consumer demand, to cap ballooning debt and close a large revenue shortfall.

“From here inflation will move higher, that obviously makes it more difficult to justify a rate cut,” Lings added.

Still, the rate of increase in consumer prices is not expected to breach the top-end of the Reserve Bank’s 3-6 percent target during the forecast horizon.

Emerging market currencies, including the rand, have been under pressure in the past month from a strong dollar bolstered by the Federal Reserve’s decision to raise U.S. rates in March and its apparent disposition to do so again.

In April a Reuters poll predicted the Fed would raise rates three more times this year. [ECILT/US]

Still the rand is expected to recoup some of its April losses against the dollar in the next 12 months – provided domestic economic growth improves. [ZAR/POLL]

Growth forecasts for South Africa have improved to 1.8 percent from 1.3 percent at the start of the year, even though mining and manufacturing shrank in March due to lingering policy uncertainty and lukewarm demand.

Growth for next year is expected to hit 2 percent.

(For other stories from the Reuters global long-term economic outlook polls package see)

editing by David Stamp

Previous articleFA Cup triumph can boost Man United’s Premier League title bid, says Jones
Next articleWorld’s urban growth will surge most in India, China and Nigeria – UN
Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.