The South African Reserve Bank’s Monetary Policy Committee is meeting this week for the final time this year, with another rate hike expected to be announced on Thursday .of 20 economists, academics and analysts, 90%, or 18 out of 20, forecast a rate hike on the way.
“By the end of the year, the FOMC will likely have hiked rates by 5.50% in the current cycle and SA by 4.75%, with the MPC likely to discuss a larger hike than 100 bps in November, particularly given the higher end rate now signalled by the FOMC, and so could surprise on the upside. Oxford Economics economist Jee-A van der Linde says the SARB will and should increase the rate by 75 bps at the November meeting, given it will want to see compelling evidence of slowing inflation.
“The Federal Reserve is likely to start slowing down the pace of increases as US inflation is easing and is close to the end of its hiking cycle. This takes the pressure off the SARB and allows it to focus more on the domestic inflation outlook. There is no consensus from the panel on when rates will peak, with the projections split across 2023. January 2023 got the biggest vote from the experts, but not at a large margin.
“The SARB acted aggressively in the hiking cycle to ensure inflation does not become entrenched, even as South Africa faced economic headwinds. Data now also points to a moderation in inflation.”