Schultz pointed to the fact that two of the SARB’s monetary policy committee members were in favour of a 50 basis point hike.
Schultz added that frontloading hikes when the rand is strong and the economy is benefitting from strong terms of trade should gain support across a still divided MPC over the coming months as the bank looks to build buffers into 2023. “The MPC’s decision to hike the repo rate by 25bps to 4.25% was in line with our and consensus expectations. Recent upward adjustments to inflation forecasts should place further upward pressure on interest rates, and additional 25bps hikes are anticipated at each of the remaining meetings for this year,” said Mamello Matikinca-Ngwenya, FNB chief economist.
In addition, consumer and business confidence remains depressed and the labour market is not expected to be very supportive to the recovery, she said. “The QPM shows increases of 25 bps at each of the remaining meetings in 2022 and hikes totalling 100 bps in 2023 and 50 bps in 2024. The tightening would take the repo rate to 6.75% and the prime rate to 10.25% by the end of 2024.”
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