The South African (SA) Reserve Bank’s Monetary Policy Committee (MPC) is expected to announce its decision on interest rates in Pretoria, Gauteng province thus Thursday afternoon.
In May, the bank raised the policy rate by 25 basis points to 7% while the prime lending rate jumped to 10.5%.
Inflation remains above the bank’s 3% target.
Statistics SA’s latest inflation print shows that inflation rose above analysts’ expectations to 5% in June.
Rising fuel prices due to the United States-Iran war have been driving inflation pressures.
Head of Macroeconomic Research at Standard Bank Elna Moolman says, “This is a dilemma for the Reserve Bank because inflation is significantly higher than its 3% target and it’s expected to exceed that 3% target in the coming months. But at the same time the Reserve Bank is one of the few central banks globally that have already hiked since the outbreak of the Iran war and South Africa’s interest rates are already reasonably high.”
“If the SA Reserve Bank hikes interest rates further, we expect this to be the hiking cycle and we still think that once the war is over and oil prices are significantly and sustainably lower, the Reserve Bank could start unwinding these interest rate hikes,” explains Moolman.
—SABC—
