Why analysts expect a rate cut in March
Economists predict 25 basis point cut in interest rate despite VAT hike
Economists are in agreement that an interest rate cut is almost a certainty, citing lower inflation, a stronger currency and greater political certainty. The consumer price index (CPI) put inflation at 4.4% in January 2018, its lowest level since 2015. CPI is one of the key measures the Reserve Bank’s monetary policy committee (MPC) uses to set the repo rate. The committee is scheduled to announce its next interest rate decision on March 28. The election of Cyril Ramaphosa as both ANC and state president would help support the rand in the short term, said Nedbank economist Johannes Khosa. If this was sustained and supported by further positive political developments, it could lead to an early interest rate cut of 25 basis points at the next meeting of the MPC, he said. Finance Minister Malusi Gigaba’s announcement during the budget speech on Wednesday of the first value-added tax (VAT) hike in 25 years got mixed responses, with critics slating it as regressive and warning it would h...
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