Dawie Roodt’s Reserve Bank interest rate expectations

Efficient Group chief economist Dawie Roodt expects a 25 basis point interest rate increase from the South African Reserve Bank (SARB) this week.

The SARB’s Monetary Policy Committee (MPC) will meet on 30 March to decide whether to increase interest rates further.

In January, the MPC raised the repo rate by 25 basis points to 7.25%, which was lower than market expectations of a 50 basis point increase.

Nearly all economists expect a 25 basis point rate this time when Reserve Bank governor Lesetja Kganyago makes the announcement.

Prominent economists which predicted a 25 basis point increase include the BER’s Hugo Pienaar, PWC’s Xanthi Payi, PSG Wealth’s Adriaan Pask, and Citadel’s Maarten Ackerman.

95% of Finder’s panel of 22 economists, property specialists and academics expect a rate hike on Thursday.

77% of the panel think the rate will increase by 25 basis points, with 14% expecting a 50 basis point hike and only 5% expecting a hold.

Roodt shares the majority view, saying he expects the Reserve Bank to increase interest rates by 25 basis points on Thursday.

More surprisingly, he expects another 25 basis point increase from the central bank by mid-year, depending on what happens with inflation.

“By then, I think we would have reached the end of the cycle. I expect inflation to gradually drift lower after that,” Roodt said.

“By the second half of the year, there is a good possibility that the Reserve Bank will decide to start cutting interest rates.”

He said South Africa is close to the upper turning point regarding inflation and interest rates.