Not everyone believes more interest rate pain is on the way – here’s why.
Counter to views that more rate hikes are on the way, Investec chief economist Annabel Bishop believes the central bank is more likely to put a hold on rates.
Countering this, Bishop said that South Africa has already hiked interest rates by 4.75% in its rate-hiking cycle that started in November 2021 “With a three to four-quarter lag between the impact of interest rates on the economy and inflation, the SARB also needs at least a pause in its interest rate hike cycle to assess the impact on both inflation and the economy,” said Bishop.
The economist expects that CPI will consistently remain at or very close to 4.5% year-on-year by March 2024.“However, what will also be key is the movements in the US interest rate cycle, particularly given the effect this has on rand depreciation, and so the risks for the inflation outlook,” said Bishop.
Bishop said that despite Investec foreseeing no hike this month or for the rest of the year – rand weakness could change this view. The Fed started hiking rates in March 2022 to combat surging inflation reaching rates to levels last seen in the 1980s, said Pask.Francois Stofberg, an economist at Efficient Group, opposes Bishop’s view, noting that the tighter global economy is likely to result in another interest rate hike.
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