Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      MultiChoice is working on a wholesale overhaul of DStv

      10 July 2025

      Spam call epidemic: operators say their hands are tied

      10 July 2025

      Britehouse unit breaks free from NTT Data

      10 July 2025

      Samsung’s bet on folding phones faces major test

      10 July 2025

      OpenAI to launch web browser in direct challenge to Google Chrome

      10 July 2025
    • World

      Grok 4 arrives with bold claims and fresh controversy

      10 July 2025

      Bitcoin pushes higher into record territory

      10 July 2025

      Cupertino vs Brussels: Apple challenges Big Tech crackdown

      7 July 2025

      Grammarly acquires e-mail start-up Superhuman

      1 July 2025

      Apple considers ditching its own AI in Siri overhaul

      1 July 2025
    • In-depth

      Siemens is battling Big Tech for AI supremacy in factories

      24 June 2025

      The algorithm will sing now: why musicians should be worried about AI

      20 June 2025

      Meta bets $72-billion on AI – and investors love it

      17 June 2025

      MultiChoice may unbundle SuperSport from DStv

      12 June 2025

      Grok promised bias-free chat. Then came the edits

      2 June 2025
    • TCS

      TCS | Connecting Saffas – Renier Lombard on The Lekker Network

      7 July 2025

      TechCentral Nexus S0E4: Takealot’s big Post Office jobs plan

      4 July 2025

      TCS | Tech, townships and tenacity: Spar’s plan to win with Spar2U

      3 July 2025

      TCS+ | First Distribution on the latest and greatest cloud technologies

      27 June 2025

      TCS+ | First Distribution on data governance in hybrid cloud environments

      27 June 2025
    • Opinion

      In defence of equity alternatives for BEE

      30 June 2025

      E-commerce in ICT distribution: enabler or disruptor?

      30 June 2025

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025

      Singapore soared – why can’t we? Lessons South Africa refuses to learn

      13 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CambriLearn
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » News » Hard to call next rates move

    Hard to call next rates move

    By Agency Staff17 July 2016
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp

    economy-640

    There is a moderately high (40%) chance of an interest rate hike by the Monetary Policy Committee (MPC) of the South African Reserve Bank next week, said Peter Attard Montalto, emerging markets economist at Nomura.

    But in general, he sees the repo rate remaining unchanged at 7% this time around and certainly rate cuts nowhere close. This is because he reckons the MPC median mode of pausing where possible while still being in a hike cycle remains.

    He explains that the uncertainty on the decision is “acute” given that consumer inflation data will be released only shortly before the rate announcement.

    Nomura expects inflation to tick up marginally, but pointed out that inflation expectations have been more stable at around the top of the target.

    “The MPC framework and the way the MPC works have not fundamentally shifted in our view despite Brexit and the fall in global rates, counter to what many investors think,” said Montalto.

    “In other words the MPC is still in a hiking cycle, rates are still below neutral and the MPC still wants to get there.”

    Montalto explained that the MPC now sees a slightly bigger output gap, with more non-structural and non-domestic forces like Brexit. He also thinks the MPC sees a little more short-term support for the rand.

    “But medium-run worries around downgrades and the period after the local elections from political risk remain,” he cautioned.

    “Overall, we think the MPC will have enough hawkish material by maintaining views around downgrade risks and the market may be underestimating Fed hike risks over the medium run. The MPC will want to keep projecting its concerns about anchoring especially as inflation is set to rise towards year-end.

    “Even if anchored now, we think risks are high that expectations can easily become unanchored in a wage-round year with food price issues. This is the type of ‘fear’ that could drive the MPC to hike the rate at this meeting.”

    Herman van Papendorp (head of investment research and asset allocation) and Sanisha Packirisamy (economist) of Momentum Investments expect a further hike of 25 basis points by the MPC before the end of the year.

    “We anticipate further modest tightening given the Reserve Bank’s view that exploiting a short-term trade-off between growth and inflation — lower interest rates to accommodate growth in spite of rising inflationary pressures — will be less beneficial in the long run,” they explained.

    The MPC’s latest inflation forecast points to a slightly lower 5,9% forecast in 2016 (previously 6,2%), while their projections for 2017 and 2018 have remained intact at 5,7% and 5,2%, respectively.

    The Reserve Bank’s decision to hold rates steady at the previous MPC meeting was in line with previous comments that monetary policy tightening was expected to proceed at a moderate pace, according to Van Papendorp and Packirisamy.

    “Even though inflationary pressures have been underpinned by supply-side shocks — rising food prices and a sharp sell-off in the exchange rate — the Reserve Bank remains mindful of potential second-round impacts which could lead to more generalised price pressures in the remainder of the consumer basket,” they said.

    Reduced inflation outlook

    Citi Research expects an unchanged repo rate decision next week. This comes off the back of its recently reduced inflation outlook given that it now expects the upward inflationary factors this year to unwind more quickly in 2017, according to economist Gina Schoeman.

    “Because the Reserve Bank typically justifies rate hikes off a breach in the 6% target ceiling 12 months out or further, the fact that CPI should be moving below 6% in the second quarter of 2017 means there is no obvious reason to tighten monetary policy right now,” explained Schoeman.

    “However, for the foreseeable future, we do see risks to the upside for the repo rate, given that the Reserve Bank has justified a rate hike before off substantial inflation risk when the inflation outlook has been within target but inflation expectations remain too high.”

    The second quarter inflation expectations survey released the same day as the MPC meeting will, therefore, be important to watch, she said.

    Citi Research furthermore attaches a lower probability to a rate cut over the medium-term horizon, because in its view, it is not likely that the CPI will drift confidently below 5% and towards the mid-4,5%-point; “base effects argue for a rise in 2017 GDP growth to around 1% and the current MPC members would only deliver a rate cut if they were confident they would be cutting the rate more than once”.

    Fin24



    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleHere’s how to stop DA ‘spam’
    Next Article Digging up data: the leap from fossils to finance

    Related Posts

    NEC XON welcomes HPE acquisition of Juniper Networks

    11 July 2025

    MultiChoice is working on a wholesale overhaul of DStv

    10 July 2025

    Spam call epidemic: operators say their hands are tied

    10 July 2025
    Company News

    NEC XON welcomes HPE acquisition of Juniper Networks

    11 July 2025

    AI in project management: a new era of efficiency and transformation

    10 July 2025

    Samsung unfolds the future with thinnest, lightest Galaxy Z Fold yet

    9 July 2025
    Opinion

    In defence of equity alternatives for BEE

    30 June 2025

    E-commerce in ICT distribution: enabler or disruptor?

    30 June 2025

    South Africa pioneered drone laws a decade ago – now it must catch up

    17 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.