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Johannesburg - The South African Reserve Bank (Sarb) will likely keep the repo rate at four-decade lows at its first policy meeting of the year next week as labour strife casts a pall on the struggling economy.
All 23 economists polled by Reuters on Friday said the Reserve Bank's Monetary Policy Committee (MPC) would hold rates at 5.0% at the three-day meeting ending on January 24.
Ten of the analysts expect the next move to be a 50 basis points rate hike in 2014, while five see a cut this year.
Persistent strikes which have hit output in the key mining sector and spread to farms are likely to hit growth, with GDP expansion seen undershooting the Treasury and Reserve Bank's forecasts of 3.0% and 2.9% respectively for 2013.
But risks to inflation, including from a weaker rand, leave little room for further easing.
"Persistent strike action has put the domestic growth outlook on a disappointing path and while inflation appears to have reached a bottom, rebasing of the CPI basket poses an upside risk to the short-term inflation figures," said Anisha Arora, an emerging market analyst at 4Cast.
Increasing lending rates would hurt consumers as inflation has squeezed their disposable income despite easily available credit, she said.
Nearly half of the country's 20 million credit-active consumers are struggling to keep up with monthly payments.
Although banks are cutting back on unbridled unsecured lending, debt levels remain high, with households spending about 76% of their disposable income on settling loans.
The year-on-year inflation rate has been ticking up since July and is expected to breach the reserve bank's 6% target ceiling this year, mainly on higher food prices.
Threat of strike weighs
Although strikes have dissipated after skirmishes last year left about 50 people dead - prompting sovereign credit downgrades from Moody's and Standard and Poor's - threats of further action lurk.
Earlier this week, miners at Anglo Platinum [JSE:AMS] staged a short-lived protest against a proposal to cut 14 000 jobs.
Fitch last week joined its peers in cutting the country's rating, citing rising social and political tensions and the inability of the government to implement effective reforms.
As if the local woes are not enough, recession in the West is also weighing on the country, whose economy still relies heavily on exports to Europe.
"On the whole it seems the combined domestic and global backdrop is just too cluttered with conflicting risk factors at this stage to aid any monetary policy easing," Arora said.
The rand has also succumbed to the uncertainty wrought by the labour unrest, and on Friday traded perilously close to last November's 3-1/2 year low of R9.01/$.
The inflationary risks from the weaker currency have seen Reserve Bank Governor Gill Marcus adopt a decidedly more hawkish tone since the reserve bank surprised the market with a 0.5% point rate cut last July.
"Personally, I'm in favour of easier monetary policy, but only if inflation trends back to the 4.5% of its target range and economic growth still be on a back foot," said Colen Garrow, an economist at Meganomics.
Recent high-frequency data has pointed to a measure of resilience in the economy, with retail sales and manufacturing output outpacing forecasts in November.
But this week the Purchasing Manager's index for December came out in contraction territory, suggesting troubled times ahead for the factor sector which accounts for about 15% of the gross domestic product.
All 23 economists polled by Reuters on Friday said the Reserve Bank's Monetary Policy Committee (MPC) would hold rates at 5.0% at the three-day meeting ending on January 24.
Ten of the analysts expect the next move to be a 50 basis points rate hike in 2014, while five see a cut this year.
Persistent strikes which have hit output in the key mining sector and spread to farms are likely to hit growth, with GDP expansion seen undershooting the Treasury and Reserve Bank's forecasts of 3.0% and 2.9% respectively for 2013.
But risks to inflation, including from a weaker rand, leave little room for further easing.
"Persistent strike action has put the domestic growth outlook on a disappointing path and while inflation appears to have reached a bottom, rebasing of the CPI basket poses an upside risk to the short-term inflation figures," said Anisha Arora, an emerging market analyst at 4Cast.
Increasing lending rates would hurt consumers as inflation has squeezed their disposable income despite easily available credit, she said.
Nearly half of the country's 20 million credit-active consumers are struggling to keep up with monthly payments.
Although banks are cutting back on unbridled unsecured lending, debt levels remain high, with households spending about 76% of their disposable income on settling loans.
The year-on-year inflation rate has been ticking up since July and is expected to breach the reserve bank's 6% target ceiling this year, mainly on higher food prices.
Threat of strike weighs
Although strikes have dissipated after skirmishes last year left about 50 people dead - prompting sovereign credit downgrades from Moody's and Standard and Poor's - threats of further action lurk.
Earlier this week, miners at Anglo Platinum [JSE:AMS] staged a short-lived protest against a proposal to cut 14 000 jobs.
Fitch last week joined its peers in cutting the country's rating, citing rising social and political tensions and the inability of the government to implement effective reforms.
As if the local woes are not enough, recession in the West is also weighing on the country, whose economy still relies heavily on exports to Europe.
"On the whole it seems the combined domestic and global backdrop is just too cluttered with conflicting risk factors at this stage to aid any monetary policy easing," Arora said.
The rand has also succumbed to the uncertainty wrought by the labour unrest, and on Friday traded perilously close to last November's 3-1/2 year low of R9.01/$.
The inflationary risks from the weaker currency have seen Reserve Bank Governor Gill Marcus adopt a decidedly more hawkish tone since the reserve bank surprised the market with a 0.5% point rate cut last July.
"Personally, I'm in favour of easier monetary policy, but only if inflation trends back to the 4.5% of its target range and economic growth still be on a back foot," said Colen Garrow, an economist at Meganomics.
Recent high-frequency data has pointed to a measure of resilience in the economy, with retail sales and manufacturing output outpacing forecasts in November.
But this week the Purchasing Manager's index for December came out in contraction territory, suggesting troubled times ahead for the factor sector which accounts for about 15% of the gross domestic product.
