South African Reserve Bank Looking to Cut Rates in July

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The South African Reserve Bank is likely to cut interest rates by a quarter of a percent next week as a slowdown in the economy during the first three months of the year could turn worse if left unchecked, a Reuters poll showed on Thursday.

Twenty-four of 30 economists in the survey taken over the past three days said the repo rate would be cut by 25 basis points to 6.50% on July 18. Two expected a cut of 50 basis points. The other four said rates would be left unchanged.

“Conditions in South Africa have been shifting in favor of a rate cut for some time,” said Razia Khan, chief economist for Africa and Middle East at Standard Chartered Bank.

Economists assigned a median 60% probability rates would be cut on July 18, even though inflation is expected to average 4.5% this year, the center of the Bank’s 3% to 6% target range.

The median forecast for economic growth was 0.7% for this year. That is 0.1 percentage point higher than last month’s median, when economists lowered their forecasts because of a quarterly 3.2% contraction when the year began.

South Africa’s private sector has been shedding jobs recently, including in the interest-rate-sensitive banking industry, where banks have already cut or announced plans to cut staffing.

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