South African Reserve Bank. Picture: MARTIN RHODES
South African Reserve Bank. Picture: MARTIN RHODES

BNP Paribas, one of the world’s largest banking groups with operations in more than 70 countries, expects the SA Reserve Bank to cut interest rates by a further 75 basis points in 2020.

The Reserve Bank cut rates by 50 basis points on Thursday, its fourth cut so far in 2020, with the repo rate now at 3.75% from 6.5% at the beginning of the year.

The Reserve Bank is likely to cut rates 50 basis points at the next scheduled meeting on July 23, and cut another 25 basis point in September, said BNP Paribas SA senior economist Jeffrey Schultz in a note.

BNP Paribas also expects that SA’s interest rates will be lower for longer than the market expects, citing SA’s weak economy and a benign inflation outlook.

The banking group only expects a hike of 50 basis points in the fourth quarter of 2021, while the market is currently pricing in an increase of 130 basis points by the end of 2021.

gernetzkyk@businesslive.co.za