Economists Foresee a Moderate Interest Rate Hike Following a Decline in Consumer Inflation

The reserve bank has taken an active approach to reducing inflation, but according to one economist, even if the Monetary Policy Committee will probably raise the repo rate, the increase won’t be significant.

On Thursday, the Monetary Policy Committee (MPC) of the South African Reserve Bank (Sarb) is anticipated to raise the repo rate; a stronger inflation reading is anticipated to result in a smaller increase this time.

Statistics The inflation rate in South Africa decreased by 0.3% in April, from 7.1% in March to 6.8%.

This is the lowest reading for inflation in almost a year, when it fell to 6.5%.

The repo rate has been raised by more than 125 basis points over what it was before to the COVID-19 outbreak as a result of the reserve bank’s proactive approach to managing inflation.

While the MPC will almost certainly increase the repo rate, according to KPMG economist Frank Blackmore, the increase won’t be as significant.

“My estimate is 25 basis points. And the cause of this is the 6.8% inflation rate. The reserve bank wants much lower inflation than this.

The weak rand relative to the dollar and strong inflation, according to economists, will force the MPC to give their choice significant thought.

The reserve bank is very concerned about the current exchange rate of the local currency, which is still hovering at R19.26 to the dollar.