JOHANNESBURG, Jan 19 (Reuters) – The Reserve Bank of South Africa (SARB) will raise interest rates to 4.00% on Jan 27 as it continues its hike cycle amid accelerating consumer price inflation, according to a Reuters poll released on Wednesday.
Eighteen of 23 economists polled Jan. 12-18 said the central bank would add 25 basis points (bps) to the repo rate next week, taking it to 4.00%, while five said it would leave rates unchanged.
“The surge in consumer inflation just below the SARB inflation target ceiling amid tighter global monetary policy supports anticipation of the South African rate hike cycle,” said Elna Moolman of Standard Bank.
“Inflation in South Africa remains reasonably benign given the continued weakness in the economy, but inflation is on the rise and the SARB interest rate normalization process will continue,” Moolman added.
Inflation (CPI) is expected to average 4.8% this year, slow to 4.5% next year and 4.4% the following year, according to the survey. The bank is trying to keep inflation within a range of 3% to 6%.
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The five economists who expected the central bank to take a break on Jan. 27 were expecting a rate hike in March. The bank raised rates in November to 3.75%.
One, Barclays’ Michael Kafe, said his view remained that the next hike would come in March, as core CPI starts to rise on the back of rental and rental costs recovering. insurance, with another 25 basis point hike in September, as a pick-up in GDP growth provides enough comfort. to eliminate excessive stimuli.
Polling medians showed increases of 25 basis points each quarter through the second quarter of next year to 5.25%. The central bank was expected to take a break for the rest of 2023.
Two-year U.S. Treasury yields rose above 1% for the first time since the pandemic began on Tuesday, with traders positioning themselves for the possibility of a hawkish surprise from the Federal Reserve that could end in four rate hikes this year.
A hawkish Fed has the potential to attract capital flows from emerging markets like South Africa.
Economic growth was expected to maintain a steady 2.0% trajectory over the next three years.
(Report and poll by Vuyani Ndaba Editing by Mark Potter)