Expectation from South Africa’s Interest Rate Decision As Monetary Policy Committee Meets Today

The Reserve Bank’s Monetary Policy Committee (MPC) is expected to hold the repo rate at 3.5% when it announces its policy decision on Thursday (19 November). That is today.

12 of 14 economists (86%) surveyed anticipates a hold when the South African Reserve Bank (SARB) makes the announcement despite nearly half of economists calling for a rate cut.

57% of economists think a hold is a right decision and 43% say the bank should cut the rate.

South Africa’s MPC meets as key data suggest gross domestic product may have exceeded its forecast for an annualised 45.2% increase in the three months through September, according to analysis from Bloomberg.

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“Stricter lockdowns in advanced economies that pose a threat to exports and output in the final quarter, as well as the bank’s decision to front-load aggressive cuts in the first half of the year, could see it stand pat,” it said.

12 of 16 economists in a Bloomberg survey see the rate staying at 3.5%, with the other four predicting a 25 basis point cut. Forward-rate agreements, used to speculate on borrowing costs, predict a less than one-in-four chance of a quarter percentage point cut.

“Split decisions at the last three meetings suggest a lack of consensus among the MPC and that its signals are ‘becoming far less clear’, which supports the case for a pause,” according to Nicky Weimar, Chief Economist at Nedbank.

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