Will the repo rate hold or fall? Experts divided

Posted On Monday, 13 July 2020 21:57 Published by
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Experts are divided on whether the South Africa Reserve Bank (SARB) Monetary Policy Committee (MPC) will hold or decrease the repo rate later this month, according to Finder’s panel of 11 experts.


55% say the rate will hold and the remaining 45% think we’re in for a rate cut. 

Senior lecturer and researcher in the Department of Economics and Finance at the University of the Free State, Dr Johan Coetzee, highlighted how close a call it will be.

“The MPC is faced with a tough trade-off between providing a domestic environment more conducive to stimulating economic activity on the one hand and encouraging foreign investment and a more stable currency through relatively higher interest rate differentials on the other,” he said.

Chief economist at Investec Annabel Bishop and Independent economist at Carpe Diem Research Services Elize Kruger are both forecasting a rate hold, with each noting that the rate is either at or close to the bottom of the cycle. Bishop put it this way:

“Interest rates are at historical lows, and the MPC has cut rates very substantially this year already. Further cuts, if they occur, are likely to wait until there is a compelling reason to drive them.”

Professor at the University of Johannesburg, Ilse Botha, on the other hand is expecting a rate cut of 25bps given “the current economic climate, debt levels are rising and a rate cut will be beneficial.”

“Inflation is also currently within target and expansionary monetary policy makes sense, although a rate cut will not necessarily result in higher spending currently,” she noted.

Economist at BNP Paribas Jeff Schultz expects the most aggressive rate cut of 50bps on the back of materializing downside risks to both its inflation and growth forecasts. 

“Our expectation for the SARB to miss it's inflation target over the following 12m, with CPI likely to average below the floor of its 3-6% target range means that the bank probably has a bit more room to help support the economy, indebted consumers and struggling companies,” he said.

When asked whether or not the Bank should pursue a full-scale quantitative easing program, 82% said the current program of bond-purchasing is sufficient. The majority (73%) also say the Bank is doing enough to support the economy during the pandemic. 

Schultz, who was in the majority, said a QE program would be a dangerous path to go down and could risk the bank's extremely well-entrenched credibility as an inflation target by markets.

CEO and chief economist at Antswisa Transaction Advisory Services, Miyelani Mkhabela, was the only panellist to say the SARB is not doing enough. 


“The SARB must purchase National Treasury bonds and I believe nationalisation of the Reserve Bank will add more value to the South African developmental state approach and expand the economy to be more inclusive to the previously disadvantaged and have at least two black banks to operate nationally in both retail and Corporate Investment Banking,” he commented.

Last modified on Monday, 13 July 2020 22:18

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