Expectations are high that the South African Reserve Bank will cut the repo rate on Wednesday thanks to benign inflation, a robust rand and retreating political and credit risk. The Reuters consensus is that the Bank’s monetary policy committee (MPC) will cut rates by 25 basis points to 6.5% this week. This would be the first cut in the Bank’s easing cycle since July 2017. It is, however, unlikely to be a unanimous decision as some of the more hawkish members may raise concerns that a potential wage price spiral could be developing, as suggested by data in the latest Quarterly Bulletin, said First National Bank chief economist Mamello Matikinca. If the Bank does cut this week, the consensus is that it will then keep rates on hold for the remainder of the year. According to BNP Paribas SA senior economist Jeffrey Schultz, there are several factors that should allow the MPC to look through the short-term headache of a one percentage point rise in the VAT rate, even though it will add ...
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