While consumers may be spared from forking out more money on outstanding debt for now, economists warn that the respite could come to an end soon.
The general consensus among 13 economists polled by Business Day is that Kganyago will once again warn, as he did at the last meeting in March, about higher interest rates as inflation is expected to rise in the coming months.
Both Kganyago and his predecessor Gill Marcus have warned that the Reserve Bank is currently in an interest rate raising cycle.
“In making the decision to leave rates unchanged, the Reserve Bank stressed that inflation is expected to move noticeably higher over the coming months and is expected to peak at 6,7% in the first quarter of 2016 driven by higher food inflation as well as a low base effect,” commented Stanlib chief economist Kevin Lings at the last MPC meeting.
“It is clear that the next move in SA interest rates is likely to be higher given the upside risk to SA inflation. This is despite the ongoing weakness in the domestic economy.”
The economists also expect the MPC to upwardly revise its inflation outlook as the global oil price begins to recover from record lows over the past six months.
The last time the SARB adjusted interest rates was in September last year.
Economists say petrol and electricity hikes, a weakening rand as well as rising food inflation is driving inflation above the SARB’s 3% to 6% target range for the year at 6,7%.
They also warn that the inflation outlook could deteriorate further if the National Energy Regulator of South Africa (Nersa) approves Eskom’s additional application to raise electricity tariffs for the second time this year.
If approved, the price of electricity would go up by over 25% this year alone.
Nersa is expected to announce its decision at the end of June.
The MPC could also potentially revise its economic growth forecasts from 2,2% to 2% as the economy remains stagnant.
Source: Business Day
The general consensus among 13 economists polled by Business Day is that Kganyago will once again warn, as he did at the last meeting in March, about higher interest rates as inflation is expected to rise in the coming months.
Both Kganyago and his predecessor Gill Marcus have warned that the Reserve Bank is currently in an interest rate raising cycle.
“In making the decision to leave rates unchanged, the Reserve Bank stressed that inflation is expected to move noticeably higher over the coming months and is expected to peak at 6,7% in the first quarter of 2016 driven by higher food inflation as well as a low base effect,” commented Stanlib chief economist Kevin Lings at the last MPC meeting.
“It is clear that the next move in SA interest rates is likely to be higher given the upside risk to SA inflation. This is despite the ongoing weakness in the domestic economy.”
The economists also expect the MPC to upwardly revise its inflation outlook as the global oil price begins to recover from record lows over the past six months.
The last time the SARB adjusted interest rates was in September last year.
Economists say petrol and electricity hikes, a weakening rand as well as rising food inflation is driving inflation above the SARB’s 3% to 6% target range for the year at 6,7%.
They also warn that the inflation outlook could deteriorate further if the National Energy Regulator of South Africa (Nersa) approves Eskom’s additional application to raise electricity tariffs for the second time this year.
If approved, the price of electricity would go up by over 25% this year alone.
Nersa is expected to announce its decision at the end of June.
The MPC could also potentially revise its economic growth forecasts from 2,2% to 2% as the economy remains stagnant.
Source: Business Day
