Money’s on a rate hike this week as oil prices and Fed move pile pressure on SARB
Markets are betting on another interest rate hike this week, although easing inflation expectations and a contracting economy could give the Reserve Bank reason to hold.
South African financial markets are anticipating a potential interest rate hike during the South African Reserve Bank's Monetary Policy Committee meeting on Wednesday. Rising oil prices and the Federal Reserve's recent decision to raise its target range have fueled inflation concerns and contributed to the expectation of a 25 basis-point increase.
Investec's Annabel Bishop stated that financial markets have priced in an 85% chance of the rate hike, with a second hike expected by the end of the year. This would raise the repo rate from 7% to 7.25% and the prime rate from 10.5% to 10.75%. Despite forecasting relatively contained August inflation at 4.5% year-on-year and 0.1% month-on-month, Bishop believes the SARB will act to counter the impact of higher oil prices and the Fed's rate hike.
The decline in the South African economy's growth and the stabilizing inflation expectations have also contributed to the likelihood of a rate increase. However, some analysts, like PSG Financial Services' Johann Els, remain skeptical, citing stabilizing or falling inflation expectations and the potential for the Fed's actions to narrow the interest-rate differential, putting pressure on the rand and exacerbating inflation. The Monetary Policy Committee is scheduled to announce its decision at 3pm on Wednesday.
Written by urgent.news from IOL's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
