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Analysts Less Sure Than a Month Ago That South Africa Will Hold Rates

Analysts Less Sure Than a Month Ago That South Africa Will Hold Rates
Lesetja Kganyago, governor of South Africa's central bank, speaks during a news conference in Pretoria, South Africa, on Thursday, May 25, 2023. Daily power outages, logistical constraints, the recent gray listing of the country by the Paris-based Financial Action Task Force and allegations by the US that Pretoria supplied weapons to Russia have all fed into recent rand weakness.

Analysts are less certain than they were a month ago that South Africa’s central bank will pause its steepest phase of monetary tightening since 2006. 

Of the 16 polled in a Bloomberg survey conducted July 7-12, half predict the central bank’s monetary policy committee will lift the benchmark interest rate by a quarter percentage point to 8.50% and the rest forecast a hold at the conclusion of the policy meeting on July 20. That’s compared with almost two-thirds who expected a pause last month.

Analysts Are Less Certain That South Africa Will Hold Rates  | The central bank's MPC will deliver its interest-rate decision on July 20

The MPC has raised the key rate by 475 basis points since it started tightening in November 2021 in a bid to rein in inflation that has been above the 4.5% midpoint of its target range, where it prefers to anchor price-growth expectations, for more than two years.

Governor Lesetja Kganyago and his deputy Kuben Naidoo said last week that only once the MPC is confident that inflation is returning to the midpoint of the target range will it stop hiking rates.

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South Africa’s consumer price index rose an annual 6.3% in May, from 6.8% a month earlier. Kganyago said he expects the gauge to revert to within the MPC’s 3% to 6% target range in June — that data will be released next week.

That’s in contrast to average inflation expectations for the year that stand at 6.5%, data from the Bureau for Economic Research survey showed last week.


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