The Central Bank has kept the repo rate steady at 5.0% since July 2012(SABC)
The Reserve Bank’s Monetary Policy Committee will on Wednesday reveal its decision on interest rates, in the process laying speculation to rest on the issue.
The Central Bank has kept the repo rate steady at 5.0% since July 2012, but with the rand hitting five-year lows, some are betting higher inflation prospects could force the Bank's hand.
The weaker currency is putting upward pressure on imported goods and there are worries that higher-than-inflation wage demands may also feed inflation further. Some analysts are talking about a rate hike as early as the second half of this year, but for Wednesday, most see the Reserve Bank keeping rates on hold.
According to Elna Moolman, Economist at MacQuarie First South, the Reserve Bank is in a very difficult position right now. Moolman further states: "The economy, the consumer in particular, is under some pressure which would argue against the interest rate hike, but there will be concerns about the inflationary impacts from the weaker rand."
Moolman says the expectation is that the Reserve Bank will keep interest rates unchanged at this stage and wait to see how long the rand remains weak and for evidence of pass-through to inflation before they start hiking.
The Bank's announcement will come on the same day the US Fed announces whether it's to further taper its bond-buying programme.