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Tough call for the SARB<\/strong><\/p>\n Policy direction also comes from the SARB, and the Monetary Policy Committee (MPC) meets next week to deliberate on interest rate action, said Saville.<\/p>\n On this score, the forward rate agreements (FRAs) fell by as much as 16.5 basis points (bps) across the curve over the past week, with the probability of a 25bp rate cut increasing to 44.8%, making for a \u201cfifty-fifty\u201d call.<\/p>\n \u201cThese aspects make for a tough interest rate call given that consumer price inflation has started to lift, while recovery \u2013 even if anaemic \u2013 is underway. Moreover, the MPC has regularly pointed to interest rates as being a blunt instrument in the war on structural economic constraints,\u201d said Saville.<\/p>\n Economists on Finder\u2019s repo rate panel<\/a> are calling for a rate cut; however, the consensus is for a rate hold next week.<\/p>\n Nine of the eleven panellists (82%) are forecasting a hold and just two (18%) \u2013 economist at Rand Merchant Bank, Mpho Molopyane, and professor of economics at the University of Western Cape, Matthew Ocran \u2013 a decrease.<\/p>\n Both panelists are forecasting a rate decrease of 25bps given the weak 2Q20 GDP economic data. Molopyane expects the bank to revise its -7.3% GDP growth outlook for 2020 to reflect a deeper contraction and as a result believes it will cut the rate.<\/p>\n Meanwhile Ocran said the figures showed an \u201ceconomy in a self-induced coma with little prospect of recovery in the next 12 months, at least\u201d.<\/p>\n Both Chief economist at BER, Hugo Pienaar, and director and head of Capital Markets Research at Intellidex, Peter Attard Montalto, are in favour of a rate cut, despite forecasting a hold. Pienaar thinks the Bank should drop the rate by 25bps and Montalto 50bps.<\/p>\n Montalto said the MPC should provide as much stimulus as possible given that the R500 billion stimulus package has largely failed to live up to its headline size.<\/p>\n \u201c\u2026as such the MPC should provide as much stimulus as it can get away with in a least regret policy move that would see rates more negative for slightly longer and also see a crystallisation of the skew in risks from here of inflation to the downside,\u201d he said.<\/p>\n \u201cThat said the MPC is viewing things as needing more stability for longer and a more balanced profile in inflation risks and hence is likely to keep rates unchanged albeit it will be a close call.\u201d<\/p>\n The panel suggested that the interest rate may increase in little over a year. 64% of the panel think the repo rate will increase in the second half of 2021, 9% the first half of 2022 and 27% the second half of 2022.<\/p>\n Read: Advisory group puts a date to South Africa\u2019s collapse<\/a><\/strong><\/p>\n<\/a><\/p>\n<\/p>\n
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