Interest Rate Hike
UNSPLASH

The South African Reserve Bank (Sarb) is expected to announce another interest rate hike after its meeting with the Monetary Policy Committee (MPC) for the final time this year.

Peter Worthington, a senior economist at Absa, projected that Reserve Bank will increase the repo rate by 75 basis points Thursday. He also revealed several reasons for this forecast outside of the upside "surprise" in Wednesday's CPI report in an interview with Cape Talk.

"We're expecting - and indeed the Reserve Bank's forecasts show - core CPI inflation continuing to rise... and we're going to find the Sarb tomorrow publishing inflation forecasts that are revised towards the upside," Worthington told the outlet.

"Another factor is that we're right at this juncture before we go into these illiquid markets over the festive season, and if they think they're going to have to hike anyway, with some risk events like the ANC elective conference... we think they will be biased to go with the 75 rather than the 50," he added.

Additionally, ninety percent of the 20 economists, academics, and analysts polled by Finder projected an imminent interest rate hike. About half of the experts believed that the central bank will raise rates by 75 basis points (bp).

At least one respondent anticipated a much larger jump of 100bp, while two forecasted a smaller 25bp hike. Two additional experts hinted that the rates would remain unchanged (hold).

Investec chief economist Annabel Bishop was the only expert who said Sarb will and should increase the repo rate by 100 bps. Bishop projected the possibility of even higher interest as the SARB attempts to keep up with the rate hikes by the Federal Open Market Committee (FOMC).

"By the end of the year, the FOMC will likely have hiked rates by 5.50% in the current cycle and SA by 4.75%, with the MPC likely to discuss a larger hike than 100 bps in November, particularly given the higher end rate now signaled by the FOMC, and so could surprise on the upside," Bishop said, according to Finder.

At least two other experts, in addition to Jee-A van der Linde of Oxford Economics, believed that the South African Reserve Bank ought to hike rates by as much as 100 basis points. Jee-A van der Linde expected that Sarb will increase the rate by 75 basis points at the November meeting, in view of its desire to slow inflation in the country.