Now Reading
South African interest rate decision due


South African interest rate decision due

s1 reutersmedia net 7
Photo: REUTERS/Siphiwe Sibeko

The South African Reserve Bank (SARB) will today release a revised interest rate decision as the country prepares for the new post-pandemic economic reality.

The central bank’s Monetary Policy Committee (MPC) is expected to slash its benchmark rate by at least 25 basis points (bp) to 3.5%, one of its lowest levels in decades. The move is intended to counteract falling performance indicators across the board: consumer inflation stands at a 15-year low of 2.1% while the eventual 2020 GDP contraction is expected to exceed the SARB’s forecast of -7%.

While the cut is expected to bring some relief to South Africa’s flagging private sector—36% of private businesses have enacted short-term layoffs and 9% have ceased operations permanently—analysts expect the rand to suffer in the coming months as emerging markets react to flaring Sino-US tensions, pandemic-induced trade disruptions and an increasingly dominant US dollar.

Although a rate cut is likely—expert expectations range from a hold to a 50-bp revision—there is a chance that the SARB could err on the side of caution after May’s vote was split 3-2 in favour of a reduction. The current easing cycle suggests a possible adjustment of roughly 50-bp over the next three months, followed by a gradual unwind in the run-up to 2021. Reports suggest that quantitative easing measures are off the cards in the short-term, as they could threaten the bank’s long-held credibility among global markets for controlling inflation.

See Also

Wake up smarter with an assessment of the stories that will make headlines in the next 24 hours. Download The Daily Brief.

View Comments (0)

Leave a Reply

Your email address will not be published.

Scroll To Top