South Africa set to hold key rate at 15-year high, delay cuts

PRETORIA: South Africa’s central bank is set to keep interest rates unchanged for a fith time in a row and signal a delayed start to an anticipated cuting cycle, with inflation risks still skewed to the upside, Bloomberg reported on Wednesday.

Economists surveyed by Bloomberg expect Governor Lesetja Kganyago’s five-panel monetary policy commitee to show its resolve in fighting price pressures by leaving the benchmark rate at a 15-year-high of 8.25 per cent. Traders concur. Forward-rate agreements are pricing in no chance of a rate cut until November.

The decision, expected shortly ater 15.00 Wednesday Johannesburg time, is likely to be unanimous, according to economists polled in a separate survey.

South Africa’s annual inflation rate climbed to a four-month high of 5.6 per cent last month, moving further above the midpoint of the central bank’s 3 per cent to 6 per cent target band where it prefers to anchor expectations.

Kganyago has repeatedly said that until inflation retreats to 4.5 per cent in a sustainable manner and setles there, the central bank will be unwilling to adjust its policy stance. He is likely to do so again, said Koketso Mano, Firstrand Ltd.’s First National Bank senior economist.

“We think they will continue to take a cautious approach to the start of the cuting cycle,” Mano said. “Simply because of inflation risks that are still tilted to the upside; especially if you follow some of the latest agricultural issues around hostile weather conditions at the start of this year that could have affected crops and the yields on crops.”