Sep 15, 2022 01:25AM ET
By: AnalysisWatch
South Africa's central bank will raise its key interest rate by 75 basis points next week to curb inflation, according to a Reuters poll, and add another 25 basis points in each of the next two quarters before pausing for the rest of 2023.
Most economists surveyed between Sept. 7 and Sept. 14, 12 out of 20, predicted another 75 basis points, to 6.25%, at their Sept. 22 meeting, following a similar move in July. The remaining eight expected a move of less than half a point.
According to a Reuters poll published on Tuesday, the US Federal Reserve, whose actions are already putting pressure on emerging markets, is expected to make another 75 basis point hike next week and is likely to hold its policy rate steady for an extended period once it peaks .
South African inflation is expected to average 6.7% this year, above the SARB's 3%-6% comfort zone, followed by 5.4% next year and 4.6% in 2024. The consensus was 0.1 percentage points faster for the next two years than thought last month.
Producer price inflation was expected to slow markedly from an average of 14.6% this year to 8.0% next year and 4.9% in 2024, although forecasts were widely split due to the uncertain global environment next year.
The sharp decline in domestic fuel prices in September, with gasoline prices falling by more than 10%, should reduce not only inflationary pressure and the risk of second-round effects, but also, crucially for the MPC, inflation expectations.
"We expect July to have been the peak of the consumer inflation cycle and there could be a slight moderation from August onwards. Of course, the latest episode of rand weakness will be inflationary, but we reiterate that the inflationary impact is less than can be inferred from looking at the rand, "said Elna Moolman of Standard Bank.
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