SA c-bank likely to hike repo rate by 75bp in 2015 – BofA Merrill Lynch

By bne IntelliNews January 13, 2015

The South African Reserve Bank (SARB) will likely raise its key repo rate by a total of 75bp this year, starting with a 25bp hike in July, according to Bank of America Merrill Lynch economist Matthew Sharrat, quoted by Business Report. By the end of 2016, the repo rate is expected have gone up by a total of 150bp from the current level of 5.75%.

SARB hiked the repurchase rate, at which it lends rands to private banks, by a total of 75bp last year to curb rising inflation and a depreciation of the local rand currency. In November, the rate-setters reiterated their view that interest rates will have to be raised further over time, with the timing depending on the evolution of inflation expectations, the speed of monetary policy tightening in the US and the domestic economic conditions.

Inflation pressures eased substantially in line with the global oil price slump, with the annual inflation rate now expected to drop to as low as 4.2% by April, according to Sharrat, from 5.8% in November and after staying above the central bank’s upper target range of 6% from April through August 2014. This will ease the pressure on SARB to hike rates when it meets at the end of this month and throughout the first half of the year, giving it the chance to support the sluggish domestic economy, plagued by power supply constraints and other structural deficiencies. However, with the base effect fading out, inflation is expected to rise sharply from late 2015.

According to Sharrat, the average annual inflation for this year will be at around 4.9%. SARB’s latest forecast from November envisaged an average annual inflation of 5.3% for 2015, down from a projected 6.1% for 2014.

Regarding economic growth, Sharrat predicted that an estimated 10% drop in rand oil prices could boost GDP growth by up to 0.4pp in six to 12 months. In November, SARB forecast growth to accelerate to 2.5% this year from a projected 1.4% in 2014, supported by improved industrial relations, but held back by domestic structural constraints, as well as by a weak global economy and subdued non-oil commodity prices.

Related Articles

UK’s Vedanta Resources to invest $1bn in Zambian copper mine

The UK-listed diversified resource and mining company Vedanta Resources will invest $1bn in its Zambian mining unit Konkola Copper Mines (KCM), creating 7,000 jobs, the mining firm said in a ... more

Almaty cost of living lowest among major cities

Kazakhstan’s largest city and business centre Almaty has dropped to last place on the Economist Intelligence Unit’s bi-annual ranking of the ... more

AB InBev sells 54.5% stake in African Coke bottling business for $3.15bn

Anheuser-Busch InBev will sell a 54.5% stake in Africa's largest Coke bottler to Coca-Cola Company for $3.15bn, the two companies said in a joint statement on December 21. The deal is expected to ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss