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Johannesburg - While a hike in interest rates is expected this afternoon, the key will be any insight to be gleaned from the Monetary Policy Committee's (MPC's) statement about what to expect in January, according to global analysts Lehman Brothers on Thursday.
"We expect a hike of 50 basis points to 11%, in line with what the
market has priced in and the consensus. Given recent rhetoric, CPIX and core CPIX prints, petrol price hikes and strong GDP and other real economy data, it would appear that the South African Reserve Bank (SARB) has no choice but to hike," say Lehman's emerging market analysts.
"We will look to the statement from the MPC for any insight into the January meeting. The MPC is likely to have received an updated inflation forecast and, given that the January meeting comes the day after December CPIX data are released, this may well colour its language," they explain.
The Lehman analysts add that the language on growth will also be
interesting, given the strong recent reading.
"Last time it saw any slowdown as more of a moderate risk than an
outright cause for concern," conclude the analysts.
The statement from the MPC starts at 15:00 and the rate decision is expected at about 15:20.
While the consensus forecast among the 13 economists surveyed by I-Net Bridge is for an increase in interest rates on Thursday by 50 basis points, the majority also expect this to be the end of the tightening cycle.
While all the economists surveyed expected an increase on Thursday, it was a far closer call as to whether another hike would take place in January.
At the time of the survey, markets were factoring in around a 30% chance of this happening, and interestingly five of the thirteen economists in the I-Net Bridge survey expected a hike in January next year, more or less in line with the market perception of this risk.
The expected increase will push the repo to 11%, the prime overdraft rate to 14.5% and the tightening cycle that began in June last year to 400 basis points.
- I-Net Bridge