Hike rates

Many economists expect MPC to hike rates by 50 basis points

The SA Reserve Bank’s Monetary Policy Committee (MPC) is meeting this week to discuss the direction local interest rates should take, with some pointing to a likelihood of a 50 basis point hike to 5.25 %.

Results of a recent Reuters poll of more than 20 economists found that 19 out of 23 economists expect a 50 basis point increase while the rest indicated a possible 75 basis point hike.

“We expect the SA Reserve Bank to increase 50 basis points in July and September before returning to increases of 25 basis points thereafter,” said Nedbank’s Johannes Khosa.

FNB chief economist Mamello Matikinca-Ngwenya said the risk of a less transitory rise in inflation and higher inflation expectations, a faster recovery in gross domestic product and More aggressive policy tightening in advanced markets, particularly the US Federal Reserve, should lead to the South African central bank accelerating further interest rate hikes.

“We now expect 50 basis point hikes in July, September and November, taking rates to 6.25% by the end of 2022. Another 25 basis points in January [2023] brings the terminal repo rate to 6.5%,” Matikinca-Ngwenya said.

The country’s annual inflation rate accelerated to 6.5% in May from 5.9% in April and March, above market expectations of 6.2%.

Since November 2021, the Reserve Bank has raised interest rates by 125 basis points.

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Anelisa Sibanda