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Repo rate to rise in March but panel divided on when the rate will peak

24 March 2023

• 95% of Finder’s panel forecast a rate hike at the March meeting
• 77% think the rate will increase by 25 bps, 14% by 50 bps
• However, nearly one in three (32%) think the MPC should hold the rate
• 55% say March will be the last rate hike of this cycle, while 23% expect the rate to peak in May

The SARB’s Monetary Policy Committee (MPC) is set to increase the repo rate at the March meeting, according to 95% of panellists on’s SARB Repo Rate Forecast Report.

77% think the repo rate will increase by 25 bps, while 14% forecast a 50 bps increase.

However the panel is divided on whether or not this will be the rate peak. 55% of panellists expect March to be the peak of this rate cycle, while 23% think the rate will peak in May and an additional 18% expect the peak to hit later this year or early next year.

Oxford Economics Africa Senior Economist Jee-A van der Linde thinks the rate will increase once more in March but says it’s a tight call on whether or not to hold.

“Headline inflation is still above target, and the rand has come under renewed pressure against the US dollar. Regardless, it should be a tight call. We expect the apex bank will wrap up the current hiking cycle with a final 25-bps rate increase, which should help to take the edge off inflation.”

Efficient Group Chief Economist Dawie Roodt agrees the rate will and should increase by 25 bps in March but expects one more rate increase in May.

“We are getting closer to the upper end of the CPI and interest rate cycle and small increments should suffice.”

However nearly one third of panellists (32%), including BankservAfrica Head of Stakeholder Engagements Shergeran Naidoo, think the rate should hold at the March meeting.

“Consumers are under pressure with the high interest rates. Although CPI is decreasing, it's not at the rate that the SARB would like, and is still outside the 3%-6% range…”

Associate Professor at the University of Cape Town, Sean Gossel agrees the rate should hold in March and says the current economic pressures could tip the bank into acting with more caution than necessary.

“South Africa still faces inflation risks as a result of the deteriorating domestic economy, gray listing, current account deficit, and likely recession coupled with international pressures arising from good jobs data in the USA. It is likely that SA is at the top of the interest rate cycle but these pressures may tip the central banks hand to over-caution.”

Several panellists, including Old Mutual Wealth Strategist Izak Odendaal, expect the SARB to follow in the steps of the US Federal Reserve with another rate increase, but think a rate hold would be a better move for South Africa.

“Faced with this further upward pressure on US interest rates, the Monetary Policy Committee is likely to respond with a 25 basis point hike.

“...However, the economy does not need higher rates as domestic inflation pressures are largely supply-related,” Odendaal said.

While it’s unclear whether the rate will peak in March or May, the rate is likely to hold in July with 90% of panellists expecting the rate to hold in the middle of the year.

By 2024 the repo rate could start to taper off, with 57% of panellists expecting the rate to decrease in the first half of the year and 52% in the second half of the year.

You can view the full report here:

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