Interest rate cut expected on Thursday

The SA Reserve Bank (Sarb) is likely to cut interest rates by 25 basis points to 6.5 percent when its monetary policy committee (MPC) meets on Thursday due to moderating inflation.

Statistics South Africa's consumer price inflation data released last month showed that headline inflation eased to 4.6 percent year-on-year in July, from 5.1 percent in June.

This was as a result of the welcome downturn in food costs, electricity and fuel prices.

Research analyst at Nomura, Peter Attard Montalto, said last week: "The Sarb MPC looks likely to cut rates by 25 basis points (bps) at its meeting on Thursday as the doves seem to have grown tired of waiting for risk events while the hawks are still willing to be patient. However, the doves are in the majority."

Montalto said: "It comes down to risk aversion or not. The doves are more risk-loving in terms of monetary policy action than we think could be justified in future."

The reasons for cutting "are still marginal, however, as most weak growth is structural and, given the risks on the horizon, at best it looks like an attempt to do what little they can to support growth, when they can, in a minimal way".

Kamilla Kaplan, an economist at Investec, said this week's MPC meeting was expected to see a further easing in interest rates by 25bps to 6.5 percent, as consumer prices index inflation, and hence inflation expectations, moderated.

"There is a marginal possibility of a 50bps cut if the Sarb aims to front-load easing," she added.

FNB senior economist Mamello Matikinca said after falling 4.6 percent year-on-year in July, inflation should have risen 4.9 percent, largely on the back of a low base in last year's fuel inflation print. However, she warned that meat prices were likely to have continued to limit the moderation in overall prices.

"The committee is likely to look through the August inflation data and note that inflation is set to begin moderating again in the fourth quarter. Should the bank opt for a more cautious approach and not lower rates? we expect them to cut (in) November."

Stubborn meat prices come on the back of the outbreak of bird flu and the cattle restocking process, due to the drought.

Moody's had welcomed the rate cut, saying it would support the short-term economic growth recovery, but the decision to cut rates coincided with "political pressure on Sarb's independence and mandate".

Business Report

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us