Economic growth predictions for 2015 were slashed to 1.5 percent, the biggest downgrade in monthly surveys since the start of the year and 0.4 percentage points lower than last month’s consensus. Growth came in at that level last year.
The poll showed 28 of 31 economists expect the repo rate to remain unchanged at 6.00 percent at the Bank’s meeting on Sept. 23. Two said the Bank would raise rates by 25 basis points and one forecast a 50-basis-point hike.
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The U.S. Federal Reserve gave emerging markets a breather last week and kept interest rates unchanged in a nod to concerns about a weak world economy, but left open the possibility of a modest policy tightening later this year.
Still, economists predict the SARB is set to hike rates by 25 basis points at its last meeting of the year in November to 6.25 percent, a measure that is likely to harm rate-sensitive parts of the economy.
“An increasingly uncertain economic outlook and some short-term respite for (consumer) inflation from softer fuel prices should keep the South African Reserve Bank on hold this week,” said Jeffrey Schultz, economist at BNP Paribas.
“We continue to pencil in another 25 basis points hike in November, but acknowledge that delays to further hikes could materialise should South Africa’s economic conditions worsen,” he added.
Schultz also said weakness in the rand and sticky inflation expectations are likely to keep the Bank’s inflation rhetoric “cautiously hawkish”.
The rand has been hitting all-time lows against the dollar and a separate Reuters poll predicted China’s slowdown will haunt foreign exchange markets for months to come, even if many emerging currencies are considered cheap.
South African inflation is expected to average 4.8 percent this year, 5.9 percent next year and 5.8 percent in 2017.
The Reserve Bank looks at a time period of 12-18 months over which monetary policy can have an impact on inflation and aims to keep inflation between its 3-6 percent comfort zone.
Economic growth is expected to recover a tad to 2.0 percent in 2016 and 2.4 percent in the following year.
However, the economy shrank for the first time in more than a year during the second quarter of 2015, raising the risk that labour disputes and slowing Chinese demand for commodities could push it towards recession.
“We would certainly prefer that the SARB does not hike given the fragility of the domestic economy but the pressures for a hike are building and will intensify in the months ahead,” said Luke Doig, economist at Credit Guarantee Insurance.