Markets react to SARB’s 75bps rate hike
South Africa's reserve bank today met market consensus by raising the repo rate by 75 basis points to 6.25 per cent. Joining CNBC Africa to discuss the reserve bank's latest repo rate hike decision is Annabel Bishop, Chief Economist, Investec, Obakeng Pitse, Head of Derivatives Structuring at Investec and Frank Blackmore, Lead Economist, KPMG.
Thu, 22 Sep 2022 16:25:39 GMT
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AI Generated Summary
- The decision by the South African Reserve Bank to raise the repo rate by 75 basis points has sparked discussions and speculations among experts about the future trajectory of monetary policy.
- Concerns about the impact of Eskom's energy crisis on economic growth, uncertainties in global markets, and the credibility of the Reserve Bank were highlighted during the discussion.
- Speculations about the voting members of the MPC being characterized as hawks or doves added an interesting dimension to the conversation, emphasizing the importance of a balanced and strategic approach to monetary policy in the current volatile global environment.
The South African Reserve Bank made a significant decision today to hike the repo rate by 75 basis points to 6.25%. This move was widely expected by the market, but the split decision of 3-2 among the monetary policy committee members has sparked discussions and speculations among experts in the field. Annabel Bishop, Chief Economist at Investec, shared her insights on the decision, expressing concerns about the potential future rate hikes and the overall economic outlook for the country. She highlighted the importance of Eskom's energy crisis and its impact on economic growth, stating that continued load shedding could lead to a contraction in the economy in the fourth quarter. The uncertainty in global markets, especially with the Eurozone facing a possible recession and geopolitical tensions rising, adds to the complexities of the economic landscape. Frank Blackmore, Lead Economist at KPMG, echoed similar sentiments, emphasizing the data dependency of future rate hikes and the need for a cautious approach. Both experts discussed the potential for further rate hikes in the coming months, with concerns about high inflation and the impact on the currency. The discussion also touched on the credibility of the South African Reserve Bank and the importance of maintaining a balanced approach to monetary policy. With the future holding high levels of uncertainty and risks both domestically and globally, the path for monetary policy remains unpredictable. Speculations about the voting members of the MPC being characterized as hawks or doves added an interesting dimension to the conversation. While consensus was reached on Governor Lissach Kanyakho as a hawk, the identification of the second hawk remained speculative. The importance of credibility for a small, major market economy like South Africa was underscored, highlighting the need for a balanced and strategic approach to monetary policy in the current volatile and unpredictable global environment.