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
    • 23 Jan 2018
      Many people only start thinking about home-ownership when they are ready to “settle down” or start a family, which is why first-time buyers these days are generally in their mid-30s, compared to those in the previous generation who were usually in their mid-20s.
    • 22 Jan 2018
      Moving away from the city to a country or coastal town and a slower-paced life is a frequent new-year resolution for South Africans, but thorough research should be done before you break free from the hustle and bustle, because making the wrong move could turn out to be a very expensive mistake, and even more stressful for you and your family than staying in the “big smoke”.
    • 22 Jan 2018
      Cape Town is home to many breathtaking and historic homes, but House Invermark designed in 1969 by South African architect Gilbert Colyn, with inspiration from two modernist icons: the Glass House by Phillip Johnson and Farnsworth House by Ludwig Mies van der Rohe is in a class of its own.
    • 22 Jan 2018
      2017 was a challenging year for the South African property market in general, despite small pockets of thriving activity in areas like the Western Cape. As we head into 2018, Tony Clarke, Managing Director of the Rawson Property Group, casts his eye forward to property trends and market influences that could make their impact felt in the New Year.
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us