South Africa’s Reserve Bank will leave interest rates unchanged at 6.50 percent next week, 25 of 26 analysts predicted in a Reuters poll, after recent data showing the economy unexpectedly slipped into recession earlier this year.
However, emerging market currency mayhem will likely prompt the Bank to switch to a hiking cycle in early 2019, the poll taken in the past three days showed.
“In the context of very weak economic growth and generally subdued underlying inflation, we expect that the (Bank) will keep rates unchanged in the near term,” said Elna Moolman, economist at Standard Bank.
However, the median forecasts showed rates are likely to rise either in January or March by 25 basis points to 6.75 percent. Six of 18 economists said the Bank would hike rates in November by 25 basis points, citing worries about a weak rand, which has lost about a quarter of its value in the last six months.
Continuum Economics wrote in a note that the Reserve Bank is unlikely to bring forward planned 2019 rate hikes to defend the rand and instead will allow the currency to act as a safety valve in the face of external events.
A separate Reuters poll suggested many emerging market currencies – like the rand – will bounce back at least partially against the dollar in a year as weakening U.S. growth momentum takes the shine off the dollar.