SARB expected to cut repo rate this week
The South African Reserve Bank’s Monetary Policy Committee is set to make its first repo rate announcement on Thursday.
The announcement comes on the back of last week’s consumer price inflation announcement, which saw a slight uptick in prices.
However, December’s CPI of 3% remained at the bottom of the Reserve Bank’s target range of 3% to 6%.
Waldo Krugell, a professor of Economics at the University of the North West, says economists expect a cut to the repo rate this week.
Krugell said the Reserve Bank would be concerned about the possible impact of a weaker rand/dollar exchange rate and higher international oil prices.
“Overall, economists are expecting a rate cut of another 25 basis points, but a lot has changed since the previous meeting at the end of last year.
“It's mostly to do with international economic uncertainties and the possibility of higher inflation and high interest rates in the US. That's going to weigh on the minds of the committee. They’ll be worried that a weaker rand dollar exchange rate and higher oil price is going to fuel inflation going forward this year.”
“It’s a balance between, I think, a good inflation outlook in South Africa; the CPI inflation is low, but these international risks they'll keep in mind.”
Reserve Bank Governor Lesetja Kganyago warned last week that certain US policies could disrupt the central banks' efforts to cut interest rates by fuelling inflation.
Speaking at the World Economic Forum in Davos, he said the measures, such as increasing trade tariffs, have the potential to slow disinflation and force monetary policy tightening.
Central banks globally, including South Africa, began reducing rates last year as inflation eased.
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