Sarb to stave off big rate cut on Trump worries

The vote-split prediction leans toward all six-members of the panel backing the cautious move.

South Africa’s reserve bank is set to look past a sharp slowdown in inflation and only cut interests rates by a modest quarter percentage point, as new risks to its outlook emerge.

All 20 economists surveyed by Bloomberg expect Governor Lesetja Kganyago to lower the rate to 7.75% from 8%, when he announces the monetary policy committee’s decision after 3 p.m. at a briefing north of Johannesburg.

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Read: Inflation battle not over just yet

The vote-split prediction leans toward all six-members of the panel backing the cautious move.

While annual inflation slowed to 2.8% in October, taking it below the central bank’s 3% to 6% target range, it is “likely to look through this temporary decline,” said Elna Moolman, Standard Bank Group’s head of South Africa macroeconomic research. She sees a 25 basis point cut.

The rand, a bellwether for emerging market currencies, has depreciated almost 3% against the dollar since Donald Trump won the US election on November 5.

Investors bet his policies on tariffs and tax cuts may see the Federal Reserve cut rates by less than forecast. That could keep the US currency strong, which is bad news for South Africa as it makes its imports more expensive, adding to domestic price pressures.

Read: Inflation at four-year low before rate decision

The MPC will probably “highlight the risks of the new incoming administration in the US, the policy risk around that, quite significantly,” said Johann Els, chief economist at Old Mutual Group.

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The panel won’t think the “inflation story has fully gone away, so they are going to be cautious on their implementation of interest rate cuts,” said Koketso Mano, senior economist at FNB. “Gradual is better than too quick.”

Read: Africa central banks seen cutting while they can after Trump win

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