Reserve Bank seen to keep rate hikes modest with an eye on support to the economy
Aggressive rate hikes are not the correct response to a stagflationary shock, analysts say
Amid surging commodity prices the Reserve Bank is unlikely to respond to heightened inflationary risks by raising interest rates more aggressively, and is expected to stick to the pace of normalisation it adopted during its last two meetings, economists say.
The monetary policy committee, which in the wake of the Covid-19 outbreak reduced the repo rate to a record low 3.5% to aid recovery, will be mindful of the need to cushion an economy still below its level before the pandemic, as well as the coming hit to consumer confidence and spending from record petrol prices. The repo rate is 4%...