South African Reserve Bank to implement next rate hike in May 2019

Google+ Pinterest LinkedIn Tumblr +

According to a Reuters poll, the South African Reserve Bank will not raise interest rates again until May 2019. The poll was conducted after the central bank surprised many economists last month by adding 25 basis points to borrowing costs.

The median forecast in the Reuters poll of 25 economists, suggests the central bank will wait until May before hiking interest rates by another 25 basis points, taking its key rate to 7 percent.

In November 2018, the central bank increased its benchmark lending rate for the first time in nearly three years, revealing that the risk of higher inflation in the longer-term remained elevated and that it could not risk waiting until later to take action.

An economist at Investec, Kamilla Kaplan said “risks to the inflation outlook remain to the upside, on possible rand depreciation and above inflationary increases in administered prices, particularly electricity tariffs”. She noted that state-run utility Eskom, which had a lot of debt, proposed to increase electricity tariffs by 15 percent a year for the next three years.

The poll predicted inflation would quicken to 5.3 percent in 2019 from 4.7 percent in 2018, but South Africa’s Reserve Bank tries to keep inflation in the middle of its 3-6 percent target range.

The South African economy is expected to expand to 1.5 percent in 2019 from 0.7 percent in 2018. The economy expanded 2.2 percent in the third quarter of 2018, taking the country out of recession.


Leave A Reply