All data is delayed
Loading...
See More

SA bracing for stiff rate hike

Jan 28 2016 07:49

Cape Town - South Africans are bracing for an interest rate hike of up to 50 basis points on Thursday, as the rand hovers at record low levels.

However, increasing inflationary pressures could dissuade the SA Reserve Bank (Sarb) at its policy meeting on Thursday from hiking the repo rate by the consensus forecast of 50 basis points.

There was no direction coming from the US Federal Reserve on Wednesday evening as the Fed kept rates steady and indicated that its focus has now moved to looking at gobal markets rather than zeroing in on its own data in determining a rise in rates.

The Fed noted the strong labour market which could still be the main argument for putting up rates in future.

"In SA it will be the SARB meeting where a hike of 25 basis is expected, while some are going for 50. If it is the latter, we could see some strength in the rand, but as an importer I would be there to buy some USD below 16.35 and to keep buying it down," said Adam Phillips,  independent treasury specialist to corporates at Umkhulu Consulting, in his morning note to clients.

"We forecast a larger incremental 50bp (basis-point) rate hike this time, given both an extended breach of the 6% target ceiling in our CPI (consumer price index) outlook and heightened inflation risks (in ZAR and food prices mostly)," said Citi Research on Monday.

"No matter which path the Sarb chooses, we see a total 100bp (basis point) in rate hikes in 2016. To do a 50bp hike now makes sense to us for it gives the MPC more options in March (pause, +25bp or +50bp) which keeps it ahead of the curve."

On Thursday morning the rand was little changed at R16.43, but the movement in the local unit later in the day "will be governed by the size of the rate hike". PPI data will be released before the Sarb governor speaks at 15:00.

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest. 24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

sarb  |  interest rates  |  inflation  |  sa economy  |  rand

NEXT ON FIN24X

 
 
 
 

Company Snapshot

We're talking about: SMALL BUSINESS

From fossils to finance – that’s been the career trajectory of Dr Merrill van der Walt, a palaeontologist until recently. She is now a statistician with a difference.
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

SA's avoidance of junk status by rating agencies: Moody's and Fitch

Previous results · Suggest a vote

Loading...