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SA loan rates to raise again in November despite weak economy

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South Africa’s Reserve Bank is predicted to boost home interest rates in November in its fight to lower inflation, despite much weaker economic growth, a Reuters poll found, running against an international tide of central banks which have been mostly easing policy.

With inflation running at 6.3% and not likely to ease off any time soon, the poll of economists taken recently suggests the central bank will remain faithful to its guns and deliver a 25 basis-point hike to 7.25% in November.

The bank has hiked rates 200 basis points in the past 2-1/2 years since it specializes in keeping inflation in their 3-6% comfort range all the while economic growth lags well below its previous levels and reduce than most of its peers.

But they have not came out on top in reining price rises in, partly due to factors beyond its control for instance state price rises and outbreaks of drought.

“We predict there’s scope for a minimum of yet another 25 basis-points rate hike this season,” said Jeffrey Schultz, economist at BNP Paribas. September and November could be the last two meetings of the season to your Monetary Policy Committee.

Most major central banks will still be unleashing stimulus to raise their economies, aside from the usa Federal Reserve, that is certainly forecast to provide its next interest rates surge in December.

The latest Reuters poll suggests South Africa’s Reserve Bank is nowhere near prepared to ease, with only three of 24 economists surveyed forecasting a cut next year.

A majority of 18 said the central bank is not overly hawkish on inflation rolling around in its current cycle which should keep set plan for overall inflation without focus just on price pressures driven by domestic demand.

“Factors which happen to have often driven inflation higher pertain to cost-push price pressures, for instance in higher administered prices,” said Colen Garrow, economist at Lefika Securities.

“But with that in mind, the committee is doing a sterling job in preserving its inflation-fighting credentials, and done just what the mandate otherwise requires it to do,” he said.

Inflation predicted to average 6.5% this year and 6.0% pick up, little improvement from recently when expectations were 0.1 percentage point higher equally for years.

But analysts also cut their growth expectations just for this year followed by by 0.1 percentage point each mostly, expecting expansions of 0.2% and 1.1%, respectively.

“Quite simply, it is very not easy to go to whichever sources of stronger growth,” said Peter Attard Montalto, emerging market economist at Nomura.

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