Reserve Bank interest rate hike expectations for 2023

Prominent economists expect the South African Reserve Bank (SARB) to increase rates twice in the first half of 2023.

In November 2022, the SARB’s Monetary Policy Committee (MPC) increased the repo rate by 0.75 basis points to 7%.

It was the eighth interest rate hike in the current cycle, with a total of 350 basis points increase since the hike cycle started a year ago in November 2021.

The Reserve Bank is expected to continue increasing rates as there are still concerns about inflation.

Nedbank chief economist Nicky Weimar predicts two more 25 basis point rate hikes within the first half of 2023.

Weimar thinks interest rates will likely peak in March and stay at that level as inflation gradually decreases to 7% this year.

The Bureau for Economic Research (BER) shares this view and expects the SARB to increase rates by 25 basis points at its 26 January meeting.

Efficient Group chief economist Dawie Roodt said that while the worst is behind us regarding inflation, it will remain above the target range for the next few months.

He expects the Reserve Bank to continue increasing rates, with a 50 basis point hike followed by a 25 basis point increase over the next four to five months.

“After that, we are pretty much done, based on what we know at the moment,” Roodt said. “The worst is behind us unless something goes horribly wrong.”

These predictions are in line with SARB Governor Lesetja Kganyago’s comments that they will continue to use interest rates to curb inflation.

He highlighted that the Reserve Bank’s repurchase rate is still below long-term levels and in expansionary territory.

“Inflation erodes the buying power of the population,” Kganyago said. “If the authorities do not step in a deal with inflation, we are selling our people short.”

South Africa’s inflation rate declined towards the end of the year, but it is still far above the target range of 3% to 6%.

The Reserve Bank’s forecasts show that it will only return to the 4.5% mid-point of the target range by the fourth quarter of 2024.

South Africa’s interest rate increases in 2022