South Africa's Reserve Bank will begin hiking interest rates again in November as long-term inflation risks threaten its comfort level, a Reuters poll showed. The median forecast from 24 economists predicted interest rates would rise 25 basis points to 6.25 percent at the last meeting of the year, due in late November. Only six thought rates would be left unchanged.
The Bank hiked rates by the same amount in July to 6.00 percent due to rising inflation risks. BNP Paribas' Jeffrey Schultz said the Bank would wait until November because "they are not in any rush at this stage to hike policy rates given that demand-driven pressures in the economy are virtually non-existent...
"I see them pausing in September. I have 25 basis points pencilled in for November ... premised on the view that the rand could potentially be a fair bit weaker against the dollar, owing to expectations of a US Fed hike." Emerging market currencies, including the rand, are likely to set new lows in coming months as China scrambles to curb market volatility and if the US Federal Reserve follows through on expectations for its first interest rate increase in nearly a decade, possibly as early as next month.
However, Governor Lesetja Kganyago said on Tuesday said while the central bank is concerned about the impact of policy normalisation in the United States, that does not mean it will simply follow global interest rates. While inflation is expected to average 4.9 percent this year, 0.1 percentage point slower than last month's forecast, next year's prediction is a more problematic 6.2 percent.
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