Expect a modest rate cut on Thursday, says Standard Bank chief economist
Opinion is divided about whether the South African Reserve Bank will announce another interest rate cut on Thursday, after a meeting of its Monetary Policy Committee (MPC).
It's lowered interest rates by a cumulative 275 basis points this year in the face of the Covid-19 pandemic.
The SARB last cut rates by 50 basis points in May, taking the repo rate to 3.75% per annum.
Economists say this time round, rates would be cut by at least 25 basis points, down to a historic low of 3.5%.
Standard Bank group chief economist Goolam Ballim believes this will indeed be the case on Thursday.
There's a very strong likelihood of at least 25 basis points. I think 50 basis points at this juncture may be a little bit of a stretch.Goolam Ballim, Group chief economist - Standard Bank
He cites an improvement in current inflation as well as prospective inflation.
In other words, CPI in say, next year in 2021, and that from the last meeting therefore means that their revision's lower - the CPI should galvanise the SARB to shift towards considering another rate cut.Goolam Ballim, Group chief economist - Standard Bank
Why 25 [basis points] and not 50? That's because if you would compare the current repo rate - 3.75 - and you would then consider what inflation is likely to be in 2021, let's say slightly higher than 4%... you suddenly on a forward view have a negative real repo rate.Goolam Ballim, Group chief economist - Standard Bank
Historically, the Reserve Bank has tended to maintain a negative repo rate generally, and for a length of time.Goolam Ballim, Group chief economist - Standard Bank
Find out more about Ballim's view that the SARB is likely to maintain a "slightly hesitant stance":
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