South Africa’s Reserve Bank will probably cut interest rates next month or in September to boost the country’s economy. A median forecast from economists, polled this week, suggests the South Africa’s economy will grow by 0.6% this year, slower than last year’s 0.8% and weaker than the 1.1% predicted in a May poll. Growth is expected to accelerate next year to 1.4%. Economists reckon this year’s slow growth should be enough to convince authorities to cut interest rates by 25 basis points to 6.50%.
“Inflation is now well-anchored within the 3% to 6% target range, and the economy is performing very poorly,” said John Ashbourne, senior emerging markets economist at Capital Economics. “We’ve pencilled in a cut from 6.75% to 6.50% at July’s meeting.”
On Wednesday, the U.S. Federal Reserve signalled rate cuts may begin as early as July, in the face of growing global and domestic economic risks. Central banks in Australia, India, New Zealand and Russia have already cut rates.
Two weeks later, the statistics agency confirmed growth contracted by a quarterly 3.2% in the first three months of 2019. The bank, along with President Cyril Ramaphosa’s incoming administration, is under pressure to revive growth.
The rand has recovered to 14.23 per dollar, almost in line with a Reuters poll earlier this month that also said emerging-market investors would be more cautious and selective in making risky bets against a strong dollar in coming months.
