Mercado Released [25 May 2015]: SOUTH AFRICAN INTEREST RATES
The Reserve Bank has maintained South Africa’s interest rate at 5.75%, despite the uptick in inflation levels. Inflation rose less-than-expected to 4.5% on a YoY basis for April, whilst analysts had expected a gain of 4.6%. On a MoM basis, inflation climbed by 0.9%, whilst core inflation was slower at 5.6% from 5.7%. The SARB has raised its inflation expectations for the year to 4.9%, whilst inflation is predicted to breach the target band within the first quarter of 2016. The higher oil price and the deteriorating local currency have continued to add pressure to the inflation level. The possibility of higher electricity tariffs are also expected to push consumer prices higher. Although the Reserve Bank expects to increase interest rates towards the latter part of this year, they will need to consider a number of factors before taking action. The path of US growth and the tightening cycle has definite implications for the Reserve Bank’s decision regarding local interest rates. The bank will also need to consider the state of the economy that has been affected by a number of factors including continuous rolling blackouts and weaker business and consumer confidence.
or more on the economy read this week’s NMG Mercado here