Another rate cut on the cards tomorrow, says Absa’s Peter Worthington

Senior Economist at Absa Group, Peter Worthington, has made a bold prediction ahead of this week's Monetary Policy Meeting, suggesting that the South African Reserve Bank may opt for a 50 basis point cut in the repo rate. This projection places Worthington at odds with the consensus forecast of a 25 basis point cut. In a recent interview with CNBC Africa, Worthington outlined the factors informing his view, emphasizing the subdued inflation, a bleak growth outlook, and the need for further monetary stimulus in light of the ongoing economic challenges brought about by the COVID-19 pandemic. While acknowledging the split opinions within the MPC, Worthington expressed confidence in the necessity of a more aggressive rate cut given the severity of the economic crisis. Despite the varying views among analysts, Worthington's assertion underscores the critical role of monetary policy in addressing the current economic climate.With the series of interest rate cuts totaling 175 basis points since the onset of the pandemic, Worthington highlighted the substantial stimulatory impact of these measures on the economy. He estimated that these cuts would inject approximately 105 billion rand into the economy over a year, primarily benefiting consumers and businesses with floating rate debt. However, Worthington cautioned that while monetary easing plays a crucial role in stimulating growth, it cannot serve as the sole solution to the economic challenges facing South Africa. Looking ahead to the Reserve Bank's meeting, Worthington anticipated discussions on growth expectations and inflation outlook. While he deemed changes to the growth forecast unlikely, citing mixed economic data, he noted the potential impact of oil price increases on inflation dynamics. Worthington's insights shed light on the complexities surrounding the economic landscape and the importance of a comprehensive approach in addressing the crisis. As the Reserve Bank navigates these uncertainties, market participants eagerly await the outcome of the meeting and the potential implications for the economy.Senior Economist Peter Worthington's divergent forecast regarding an aggressive interest rate cut underscores the nuanced factors influencing monetary policy decisions amid the current economic turmoil. Worthington's analysis emphasizes the significance of subdued inflation, a grim growth outlook, and the imperative for further stimulus measures to bolster the economy. The anticipated rate cut, if realized, would mark a departure from the consensus forecast, reflecting the divergent perspectives within the MPC. Worthington's projection serves as a barometer for the evolving economic landscape and the intricate considerations shaping policy responses. As stakeholders await the outcome of the meeting, Worthington's insights provide valuable context for understanding the potential trajectory of monetary policy and its implications for South Africa's economic recovery.