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The Reserve Bank will reveal its decision on interest rates tomorrow…

by , 22 July 2015

The South African Reserve Bank's monetary policy committee is in the midst of a meeting.

Tomorrow South Africans will find out whether the central bank is hiking interest rates. With inflation creeping higher, it looks like the chances of a hike are increasing.

Let's take a closer look at what's going on…


The Reserve Bank has indicated raising interest rates is a possibility


The Reserve Bank has been hinting about the chance of an interest rate hike soon, says IOL. Tomorrow Lesetja Kganyago, the governor of the bank, will reveal if it’s raising interest rates “for the first time in a year”.

A weak rand, which has resulted in rising inflation, could benefit from a hike, adds IOL. But a rate increase could impact an already fragile economy.

In May, one of the bank’s deputy governors, Kuben Naidoo, suggested “there was a strong likelihood of an interest rate increase,” reports iAfrica. This was due to higher “oil prices, above inflation wage settlements and a weaker rand”.

Since then the rand is still trending weaker, but the oil price has ebbed, adds iAfrica.

Analysts can’t agree on what will happening tomorrow, notes MoneyWeb. Director of emerging market strategy at Societe Generale SA, Pheonix Kalen, says the bank has an “opportunity to show the market that they are serious”.


Higher than expected inflation data could hint an interest rate hike is more likely


Later this morning, Stats SA will reveal its data on consumer inflation for last month.

Forecasts suggest inflation will have risen again through June, reports Fin24. Analysts at Nedbank say the Reserve Bank is aware “of the fine balance between high inflation and low growth”.

There’s a chance the bank won’t hike rates with the prospects of the US beginning to hike rate in a couple of months, adds Fin24.

A survey conducted of economists by Bloomberg showed that of 31 surveyed, 17 of them think rates will rise by 0.25%, notes IOL.

Analysts will be waiting for the release of inflation data today. If this jumps higher, it could indicate there’s a higher chance of an interest rate hike tomorrow.

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The Reserve Bank will reveal its decision on interest rates tomorrow…
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