Interest Rates cut on the cards in South Africa
Traders now expect South Africa's first interest rate cut to happen in March 2024. Traders predict that South Africa will have its first interest rate cut in March 2024. This prediction is based on the recent decrease in money flow and loans to the private sector. The economy experienced its slowest growth in nearly two years.
In October, the money supply and private credit growth were lower than expected. The money supply increased by 6% compared to the previous year. Private credit growth increased by 3.9% compared to the previous year.
The median estimate in a Bloomberg survey was for growth of 7.1% and 4.3%, respectively.
Traders are expecting a rate cut of 0.25% in March. This is earlier than what economists had predicted. Traders are using forward-rate agreements to speculate on borrowing costs.
Before the data release, those bets had been for a rate cut in May.
The slowdown in both indicators may be signaling strain in households and corporates’ finances from higher interest rates.
Before July, the central bank increased interest rates by a total of 475 basis points since November 2021 to control inflation.
Governor Kganyago stated last week that the policy is restrictive. This is because the interest rates are currently at 8.25%. The policy aligns with the inflation outlook and expectations.
Prices have been above the bank's desired inflation range for more than two years. The bank's desired inflation range is where the MPC wants to maintain expectations.
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