Analysts forecast MPC will keep policy rate unchanged

Following dovish comments from the US Federal Reserve last week, close attention will be paid to 2019’s first meeting of the SA Reserve Bank’s monetary policy committee (MPC).

Economists will also be watching this week to see whether data from Stats SA points to a continued recovery in the economy after SA exited its first recession since the global financial crisis in the third quarter. After hiking the repo rate by 25 basis points for the first time in two years to 6.75 at its November meeting, economists expect the MPC to keep the policy rate steady when it announces its decision on Thursday.

“The underlying growth and inflation dynamics still support a neutral monetary stance,” said Nedbank senior economist Nicky Weimar.

The lower oil price and a R3/litre decline in the petrol price will most likely see the bank revise its inflation projections lower, according to FNB chief economist Mamello Matikinca.

“This should be sufficient to convince the MPC to leave interest rates on hold until around November, when it is forecast to resume its mild tightening cycle,” Weimar said.

This will be the final MPC for deputy governor Francois Groepe, who resigned in early January, which will leave just five members on the panel.

Momentum Investments expects up to two interest rate hikes of 25 basis points each, during the course of 2019 and 2020, while Investec does not anticipate any rate changes for the first half of 2019.