South Africa: No Change - SARB Likely to Hold Rates, Say Economists

analysis

The SA Reserve Bank is seen holding rates this week at the conclusion of its last scheduled Monetary Policy Committee meeting for 2019. Given anaemic economic growth, weak demand and low inflation, a minority of economists are making a case for a cut.

The SA Reserve Bank (SARB) in the view of most economists will leave its key lending rate unchanged at 6.5% on Thursday 21 November when the Monetary Policy Committee (MPC) concludes its 2019 season. In a Reuters poll of 28 economists, 21 expected the MPC to keep rates steady, while seven said they expected a cut of 25 basis points.

Analysts who expect the SARB to hold despite the tame inflation environment and sluggish economic growth, note the worsening fiscal situation and mounting concerns about the prospects of a Moody's downgrade, which could send the rand into a tailspin.

"While the SARB will undoubtedly take note of the benign outlook for inflation, we are of the view that the SARB will exercise caution. We expect the SARB to keep rates on hold on the back of SA's deteriorating fiscal metrics, Moody's putting SA on negative watch and pressure on the ZAR which is seen limiting the SARB's...

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