The Sunday Mail
South Africa’s central bank will probably keep the benchmark interest rate unchanged and lower its economic-growth forecasts as the country reels from a third wave of Covid-19 restrictions and after deadly riots.
While output rose more than expected in the three months through March and data, including the composite leading business-cycle indicator, suggest an acceleration in Gross Domestic Product in the second quarter, the unrest that erupted in South Africa recently is a key risk to the outlook for 2021.
The looting and arson, and reintroduction of a strict lockdown are likely to push policy makers to lower their 4,2 percent expansion projection for this year and may push out their prediction that output will return to pre-pandemic levels in 2023.
Economists, including Michael Kafe of Barclays Bank, see the riot damage shaving as much as one percentage point off GDP growth in 2021.
That could see the monetary policy committee delay the start of an interest rate hiking cycle. The panel has since late last year signalled that its next move will be up and the last time any of its five members voted for easing was in January.
The central bank’s quarterly projection model, which the committee uses as a guide, in May indicated one rate increase of 25 basis points in the second quarter and another in the fourth. — Fin24.com
The MPC already deviated from the framework by leaving the benchmark unchanged at its last meeting and consumer-price growth that remains close to the 4,5 percent midpoint of its target band shows it still has room to support the economy. — Fin24.com
