TOO CLOSE TO CALL
ANALYSIS: Why Lesetja Kganyago didn’t cut rates
Concerns about the risks building against the rand dominate the MPC. But a split between hawks and doves on the committee makes the outlook on rates uncertain
The big question after the Reserve Bank’s failure to cut rates last week is whether it is going to make any further rate cuts this year. There is even the possibility that the Bank’s next move could be a rate hike. The voting pattern at last week’s monetary policy committee (MPC) meeting reveals that it is split between four hawks and three doves, suggesting that the next few meetings are going to be a very close call. Though the Bank’s inflation and growth forecasts have barely changed since the last MPC meeting in July, the MPC feels that the balance of risks to inflation have increased to the upside. The MPC statement identifies several worrying risks to the inflation outlook, but only two positive factors that could result in a better inflation profile: the prospect that domestic economic growth and food price inflation could turn out lower than expected. As ever, the rand remains its key concern. This is because a sustained weakening of the exchange rate could lead to higher in...
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