Bank ex­pected to hold repo rate un­changed

Business Day - - NATIONAL - Su­nita Menon [email protected]­

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

Econ­o­mists will also be watch­ing 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.

Econ­o­mists ex­pect the MPC to keep the pol­icy rate steady when it an­nounces its de­ci­sion on Thurs­day, after hik­ing the repo rate by 25 ba­sis points for the first time in two years to 6.75% in Novem­ber.

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

FNB chief econ­o­mist Mamello Matik­inca says lower oil prices and a R3 per litre de­cline in the petrol price will most likely see the Bank re­vise its in­fla­tion pro­jec­tions lower.

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

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

How­ever, this is not likely to sway pol­i­cy­mak­ing de­ci­sions in a mean­ing­ful way, says Mo­men­tum In­vest­ments econ­o­mist San­isha Packirisamy.

“The Bank takes into ac­count a num­ber of in­puts, in­clud­ing global devel­op­ments, lo­cal data, in­puts from the re­search depart­ment and the out­come of the quar­terly pro­jec­tion model, in ad­di­tion to the views and opin­ions of all the mem­bers of the MPC,” she says.

On the global front, con­cerns over global growth have come to the fore, as has the re­cent weak­ness of global mar­kets, says In­vestec chief econ­o­mist Annabel Bishop.

Lo­cally, risks abound, “rang­ing from fis­cal per­for­mance, and par­tic­u­larly the threat of credit rat­ing down­grades, to the up­com­ing na­tional elec­tion, which is likely to see am­pli­fied po­lit­i­cal uncer­tainty and pop­ulist rhetoric”, she says.

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.

Tues­day and Wed­nes­day will pro­vide more clar­ity on how the econ­omy per­formed in the fourth quar­ter of the year as min­ing and re­tail data comes to the fore. The re­tail sec­tor is ex­pected to have re­ceived a sig­nif­i­cant boost from the Black Fri­day and Cy­ber Mon­day sales. The Bloomberg con­sen­sus is for a 2.5% in­crease.

Min­ing might be softer, com­ing from a high base, strikes should have weighed on to­tal gold pro­duc­tion and ex­cess in­ven­to­ries may have stunted ac­cel­er­ated iron ore pro­duc­tion, says Matik­inca.


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