JOHANNESBURG - South African Reserve Bank (Sarb) governor Lesetja Kganyago is currently announcing the bank's latest decision on interest rates following the three-day meeting of the monetary policy committee (MPC) which he chairs.
The struggling economy needed a boost by the MPC announcement to reignite growth as the country faces a tough few months ahead, as many economists expressed before the announcement.
Ahead of the announcement by Sarb, Marinus said all eyes would be on the Monetary Policy Committee with the upcoming interest rate decision, following the recent actions by central banks in developed markets.
“The market is expecting a decline in interest rates, but the level of decline might just be a surprise.”
There is enormous pressure for the SARB to significantly cut interest rates today in a bid to shore-up the economy amid Covid-19 after a 25 basis points reduction to 6.25percent in January.
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BNP Paribas senior economist Jeff Schultz said the co-ordinated global central bank action in the past week had opened the door to a bolder cut from the SARB.
“We expect a 50 basis points cut in the policy rate to 5.75percent, though we think a 75 basis points cut is also possible, depending on how large its growth downgrades are.
“While the growth and inflation outlook looks set to weaken, domestic fiscal risks also look set to rise. This is likely to keep the bank's rhetoric cautious. For now, we maintain our call for the policy rate to end 2020 at 5.5percent, though we acknowledge that the risks of a much larger recession than we forecast are building, prompting potentially deeper cuts in the second half.”