Johannesburg - Despite rising inflation, South Africa's Reserve Bank will wait until May before hiking interest rates again, faced with stuttering economic growth and with a quarter of the labour force out of work, a Reuters poll found on Thursday.
Rates in South Africa have been on the rise, up 175 basis points in the last two years. The SARB raised its repo rate by a half point in January in response to a worsening inflation outlook.
Two-thirds of the 30 economists and analysts surveyed this week said the central bank would hold off at its March 17 meeting, leaving rates at 6.75 percent. The remaining third called for a 25 basis point rise to 7.0 percent.
“Obviously the argument for hiking remains strong, with the wide current account deficit we saw this week (but) they will probably hold off this time just because of the weakness of the economy,” said John Ashbourne at consultancy Capital Economics.
A majority expect the next quarter point rise at the May meeting, followed by another similar move in the third quarter, which would take the repo rate to 7.25 percent by end-year. The survey has one more such rate rise on the horizon in early 2017.
Should the United States Federal Reserve hold off this month on another interest rate rise and wait until June as most currently expect, that could also reduce downward pressure on the rand and curb imported inflation.
A separate Reuters poll earlier this month suggested the three-year rout in emerging market currencies is probably easing, with an increasing number of strategists questioning whether the US dollar will be able to set new highs.
“The sluggish pattern of growth both domestically and internationally, together with more benign global inflation, may allow monetary authorities (US and the SARB) some room to hold off on rate hikes for now,” said Luke Doig, senior economist at Credit Guarantee Insurance.
Earlier this week, a wider-than-anticipated current account deficit was the latest official evidence of South Africa's persistently sluggish economy, showing a sharp fall in exports combined with decreased inflows of foreign investment.
The median growth forecast is now just 0.7 percent for this year - 0.2 percentage points lower than last month's consensus - while next year GDP is expected to expand 1.4 percent, a meagre amount for an emerging market economy.
Statistics South Africa this month showed Africa's most industrialised economy expanded 0.6 percent in the final quarter, slowing slightly from the previous three months as the agricultural and manufacturing sectors shrank.
Growth has been in decline since 2012 when labour unrest in the mining sector shook the country's key export sector, now responsible for just under half a million labourers.
Despite the slowdown, inflation promises to quicken to an average of 6.4 percent this year, according to the poll, slowing slightly to 6.3 percent next year but well over the upper target band of the Reserve Bank at 6.0 percent.