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Wednesday, 28 March will see the conclusion of the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) meeting and in turn the decision whether or not there will be a change South Africa’s lending rates.
Recent Consumer Price Index (CPI) data released by Statistics South Africa (Statssa) has shown year on year inflation in February 2018 to be around 4%, well within the Reserve Banks targeted 3% to 6% range. A firmer rand on the back of a weaker dollar and improved business confidence in South Africa (aided by recent leadership changes) has helped tame inflation in the near term.
Friday’s (23 March) news that Moody’s Investor Relations has decided not to downgrade South Africa’s local currency credit rating to sub investment grade (“junk”) also removes a near term risk factor for inflation and South Africa’s cost of borrow.
South Africa’s repo rate (the rate at which banks borrow from the Reserve Bank) currently sits at 6.75% and the prime lending rate (to consumers) is at 10.25%. Expectations are, in a slight majority, that lending rates could be lowered by 25bps (0.25%).