by Vuyani Ndaba
JOHANNESBURG (Reuters) – South Africa’s central bank will raise its key interest rate by 75 basis points next week to curb inflation, a Reuters poll found, adding another 25 basis points in each of the next two quarters before stopping for the rest of 2023.
A majority of economists in a September 7-14 poll expected 12 from 20, another 75 basis points to 6.25% at the September 22 meeting following a similar move in July. The remaining eight expected a half-point smaller move.
The Reserve Bank of South Africa has raised its key lending rate by 200 basis points so far in this cycle.
“Evidence of broader price pressures should lead to the latest hawkish statement,” said Jeffrey Schultz of BNP Paribas (OTC :), who like most expects a move of 75 basis points, adding:
After that, the SARB is set to raise another 25 basis points in November and either January or March before stopping at 6.75% for the remainder of next year, a peak in the cycle, according to the survey.
Schultz forecasts a higher 7.00% in January 2023, with the risk of interest rates rising rather than lowering next year if underlying inflationary pressures prove more problematic.
The US Federal Reserve – whose actions are already putting a lot of pressure on emerging markets – is expected to raise another 75 basis points next week, and is likely to keep the interest rate steady for an extended period once it reaches its peak, according to a Reuters poll. Tuesday. [ECILT/US]
South Africa’s inflation was forecast to be 6.7% this year, above the SARB’s comfort zone of 3%-6%, followed by 5.4% next year and 4.6% in 2024. The consensus was 0.1 percentage point faster over the two years The next two than was thought in the past month.
Reuters South Africa Rate and Economist Poll – September 2022 https://fingfx.thomsonreuters.com/gfx/polling/lbpgnkmmwvq/Pasted%20image%201663149748119.png
Producer price inflation was expected to decelerate markedly from an average of 14.6% this year to 8.0% the following and 4.9% in 2024, although expectations are widely circulated due to an uncertain global environment next year.
South Africa is likely to swing a current account deficit of about 1% of GDP next year from a surplus of the same amount in 2022, which could put pressure on the rand.
“High unit labor costs, flat two-year inflation expectations in the third quarter and what could push the weaker South African Rand back into double deficits make us comfortable in our above consensus on rates,” said BNP Paribas’s Schultz.
But economists at Standard Bank said moderation in the prices of several commodities in recent months – particularly food and fuel – bodes well for some time to potentially ease global inflation pressures.
The sharp drop in domestic fuel prices in September, with gasoline prices down more than 10%, is supposed to reduce inflationary pressure and the risk of second-round effects, as well as inflation expectations, which is important for the MPC.
“We expect July to be the peak in the consumer inflation cycle and there may be a slight moderation from August. Of course, the last bout of rand weakness will be inflationary, but we repeat that the inflationary impact is less than can be inferred from Standard Bank’s look at the rand,” said Elna Mollmann of Standard Bank. .
A separate Reuters survey predicted that the high-yielding currency would erase most of its 10 percent losses so far this year, returning strength to $16.30/$ in a year. [EMRG/POLL]
Chronic power shortages continue to erode South Africa’s ability to create jobs for its young people, and the economy was expected to grow 1.9% this year and just 1.5% next year.
South Africa’s gross domestic product shrank 0.7% in the last quarter.
(For other stories from the Reuters World Economic Poll 🙂