SARB independence, composition of MPC to get spotlight at
rates announcement
The question and answer session following the day's rate
announcement by Reserve Bank Governor Lesetja Kganyago will be telling as
topics of the bank's independence and who might be appointed to the Monetary
policy Committee following deputy governor Francois Groepe's resignation, head
of global markets research at RMB Nema Ramkhelawan-Bhana commented in a market
update.
"Talk of nationalisation has been watered down in
recent days by the president and the minister of finance, with both stressing
that the independence of the bank is non-negotiable, while the SARB remains
firm on its mandate," she said.
However, the governor’s assurances on these points are
unlikely to quiet the noise as the SARB’s role in the economy is a major
talking-point among political parties ahead of the elections, she added.
It is expected that the Reserve Bank will keep interest rate
unchanged.
"The global environment is arguably more supportive of
risk assets than it was in November, with the Fed no longer assumed to be in a
hiking cycle and China pledging to reflate its economy, affording the SARB
opportunity to keep rates on hold – at least in the short term.
"That isn’t to say that the SARB will be pressing pause
indefinitely: uncertainty over US and global growth and, ultimately, the Fed’s
interest-rate path, will create two-way risk to the rand.
"This could precipitate further hikes if the exchange
rate weakens persistently, posing meaningful upside risks to inflation," Ramkhelawan-Bhana commented.
As for data on the fourth quarter economic activity recently
released – Ramkhelawan-Bhana is of the view it will have "little bearing"
on the bank's growth assumptions.
November retail data, which grew by 3.1%, was better than
expected, and positive manufacturing data may offset weak mining figures, she
explained.
"This points to a 4Q18 GDP print of around 2.0%,
implying that 2018’s growth is likely to have averaged around 0.7%, 0.1ppt
higher than the SARB’s 0.6% assumption."