Economists Predict Another Interest Rate Hike For South Africa In Nov 2023

Economists from Bank of America (BofA) are saying that in November 2023, South Africa is likely to experience another prime interest rate hike by a small amount (25 basis points).

The South African Reserve Bank kept the repo rate steady at 8.25% during its September 2023 meeting, as anticipated, but emphasized that the fight against inflation was not yet done. Policymakers cited concerns about the continued depreciation of the rand and the ongoing pressures on inflation as the key drivers.

Why Is Another Interest Rate Hike Expected?

Well, a few things are going on. Prices of things like oil and food might go up, which can lead to overall prices going up (inflation). For example, bird flu is causing a shortage of poultry products, so the cost of food might increase. Also, the value of South Africa's currency (the rand) is going down compared to the US dollar, making it weaker. All these factors could push up the cost of living in South Africa.

The economists at BofA think that by the end of 2023, the average increase in prices (inflation) will be around 5.5%. They believe the central bank of South Africa (SARB) will raise interest rates to help manage this.

Read More Here: South Africa can expect another interest rate hike in 2023, say economists

Additionally, local economists from the Bureau for Economic Research (BER) at Stellenbosch University are also worried that the SARB might raise its interest rates in November due to concerns about inflation.

The value of the Rand has weakened, which could lead to higher inflation. The central bank aims to keep inflation between 3% and 6%, with a target of around 4.5%. The recent drop in the value of the Rand and concerns about near-term inflation have increased the likelihood of a rate hike.

This potential rate increase is also influenced by the fact that two out of five SARB committee members voted for a rate hike at the September 2023 meeting.

Even though there's some uncertainty about the impact of recent events, like the change in oil prices and conflicts in the Middle East, economists believe that inflation might rise above 5%, leading to a 25 basis point increase in the repo rate from 8.25% to 8.50% to control inflation.

Read More Here: Rand weakness and inflation worries: What’s ahead for SA’s repo rate?