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Johannesburg - South Africa's repo rate is expected
to remain unchanged at 7.0% when the decision is made on Tuesday next week,
according to a snap poll of nine leading economists by I-Net Bridge.
However, three of the nine economists hold out hope that a cut of 50 basis
points could be in the offing when Gill Marcus makes her first decision as
central bank Governor.
Concerns remain around above-inflation wage settlements of 7% to 13% and
recent strike action that could have costly economic repercussions. Eskom is
likely to be granted increases of 45% over three years, which will be
inflationary, following the recent 31% increase that is already taking its toll
on consumers.
However, on the positive side, CPI inflation is due to dip below
the target at some point soon, potentially only then opening the window for a
cut.
The strong rand over the last few months is also likely to weigh on the MPC
deliberations, being dis-inflationary but at the same time weighting on export
growth.
"Next week's Monetary Policy Committee's (MPC's) press conference should,
then, be a key opportunity for the new Governor to set out her thinking on the
economy and policy rates. The Q&A after will likely be dominated by questions
about her views on the MPC's inflation-targeting mandate and reserve
accumulation and currency policy.
"She will need to be very clear in her
communications strategy on this front as what she says will live with her
through heated debates with the political left on these matters," said an
international economist who participated in the poll.
"While such a debate will happen (and be noisy), the MPC's current policy
is clear. In our view, Governor Marcus must not be afraid of upsetting the left
to defend both current policy and policy she believes in. Unions have called
for a one percentage point interest rate cut at this meeting and we think they
will be disappointed. As such, her grace period with them will likely be
short."
The decision will be made shortly after 15:00 on Tuesday November 17.
Forward and swap interest rate markets are also waiting with bated breath
for any news on whether the MPC will revert back to bi-monthly meetings next
year as they need to price in expected rate changes during these timeframes.
There is also some conjecture that the December meeting may be superfluous,
especially if a cut happens now.
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I-Net Bridge