Reserve Bank not reducing borrowing costs as rate increases cycle ends
The end of a hiking cycle doesn’t mean the start of a cutting one, and many are ‘running ahead of themselves’ with respect to forecasting rate cuts
The end of the interest-rate increase cycle in SA doesn’t mean that the Reserve Bank will start reducing borrowing costs, governor Lesetja Kganyago said on Thursday. "We could be coming to the end of our hiking cycle," he said in an interview with Bloomberg TV. "That you are coming to the end of the hiking cycle does not mean that you are commencing a cutting cycle." The Bank’s monetary policy committee (MPC) has kept its benchmark rate unchanged at 7% since March 2016, even as inflation exceeded its 3% to 6% target band for most of last year. Forward-rate agreements, used to speculate on borrowing costs, show investors are pricing in 20 basis points of rate cuts by the end of the year, even as the rand weakened after President Jacob Zuma fired Pravin Gordhan as finance minister in March. "A lot of market commentators are running ahead of themselves with respect to" forecasting rate cuts, Kganyago said from the World Economic Forum on Africa in Durban. While the rand weakened as muc...
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