SARB to hold the repo rate

Economists Unanimously Forecast the SARB will Hold the Repo Rate

* Image sourced from Moneyweb

The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) is expected to hold the repo rate at the 23-25 March meeting, according to a unanimous vote by 25 panellists on Finder’s SARB repo rate forecast report. However, 28% say a hike could be on the cards for this year. 

While the majority (88%) of the panel is in favour of a rate hold, 12% think that the rate should be cut. On average, they say the rate should be cut by around 42 basis points.

BNP Paribas chief economist Jeff Schultz thinks that the MPC will most likely be united in a decision to hold the repo rate given economic uncertainties: “A rise in global commodity prices, most notably oil, coupled with a return to shaky risk sentiment stemming from a ramp-up in core rates markets indicates to us that the SARB is likely to remain calm and prudent, maintaining policy rates at the current 3.50% in March. Given more acute global economic uncertainties, we expect a less divided committee in favour of keeping policy rates unchanged this month.”

UNISA economics lecturer Mzwanele Ntshwanti, is one of three panellists who said the rate should be cut: “The economy remains demand constrained. The SARB needs to create the space for dynamism in the economy and aid governments attempt to grow the economy.” 

STANLIB economist Ndivhuho Netshitenzhe says the bank will and should hold the rate: “While the inflation rate is expected to show some upward bias, South Africa’s inflation remains broadly well under-control at both a headline as well as a core level. Importantly, while this upward trend in inflation is also expected to emerge in global inflation data, including within the US and Euro-area, central banks around the world are likely to maintain accommodative monetary policy stance given the ongoing uncertainty around the path of recovery.

“As such, it is probably the best option that the SARB take a wait and see approach in the short term and not lift interest rates too soon as this would stifle any emerging pent up demand in the economy, especially since the upward trend in inflation is expected to be short-lived and likely to be accentuated by a low base effects.”