Interest Rate Prognosis

Yesterday the South African Reserve Bank (SARB) hiked the repo rate by 25bps to 6.25%.

In essence the Reserve Bank:

  • Is more concerned that inflation will move to the upper end of the target range and that a number of factors, namely, electricity prices, the exchange rate and higher food inflation, could push inflation above the target on a persistent basis.
  • Acknowledges that the economy remains very weak but their primary mandate is to keep inflation under control.

The tone and focus of the Reserve Bank’s statement together with an expectation that inflation is expected to move higher in 2016 suggests that the Reserve Bank will continue to increase interest rates in 2016.

Source:  Kevin Lings, Chief Economist, Stanlib