The Reserve Bank is likely to turn up the hawkish rhetoric at its monetary policy committee meeting this week, but with inflation risks fairly evenly balanced, the hiking cycle is probably at an end. Just don't expect rate cuts any time soon. Even though headline CPI hit 6.8% in December (against a consensus expectation of 6.6%), economists remain hopeful that consumer inflation has peaked and will fall back within the 3% to 6% target band within six months. Less clear is whether the extent of disinflation will be sufficient to allow the bank to move from the hiking cycle of the past two years into a cutting phase. Most economists expect rates to remain on hold throughout 2017, and some through 2018 as well. Since the recent trough of 5% in 2013, the bank has hiked the repo rate by 200 basis points in response to broadening inflationary pressures. Last year, it imposed 75 basis points of hikes, bringing the repo rate to 7%. The Reuters consensus is that the repo rate will remain at ...
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