While markets reflect simmering uncertainty over the path forward for interest rates in South Africa, fund managers are convinced that the country has hit its peak, and the next move from the Reserve Bank will be a cut.
Ahead of the July meeting, most analysts were anticipating another 25 basis point hike in the interest rate, given South Africa’s still-high inflationary environment, combined with a weaker global market position. The bullish outlook on interest rates comes amid “jitters” in the market, emanating from comments made by Deputy SARB Governor Fundi Tshazibana last week, where she warned that South Africa’s hike cycle may not yet be over.
However, while inflation is expected to be higher month-on-month – around 1%-1.2%, based on the electricity tariff hikes that came into effect in July – the year-on-year rate is expected to be much lower, given the high base of July 2022.