Interest rates unchanged?

The South African Reserve Bank (Sarb) will leave interest rates unchanged at its January 18 meeting, a Reuters poll showed yesterday.

The rand has gained almost 8% in the last six months – with most made after Deputy President Cyril Ramaphosa was voted leader of the ANC in December.

However, the rand moves aren’t enough to prompt economists to pencil in a rate cut from the current 6.75% just yet, 17 of the 20 economists polled said.

“We now think that the bank will wait until after the February national budget to assess whether the Treasury has done enough to appease Moody’s,” said Jeffrey Schultz, BNP Paribas economist.

Sarb unexpectedly cut its benchmark lending rate for the first time in five years in July, citing weak growth and easing inflation.

The rise in consumer prices is expected to average 5.1% this year and 5.4% next, versus 5.2% and 5.4% in the previous survey.

Informa Global Markets’ Christopher Shiells said if the new ANC leadership helps avoid a credit rating downgrade and the rand remained steady, Sarb may try to squeeze in one more rate cut if upside inflation risks are thought to have fallen.

More ratings reviews are expected this year – starting with Moody’s in March – which will hinge heavily on the budget and SA’s potential to improve its growth. – Vuyani Ndaba, Reuters