By Vuyani Ndaba
JOHANNESBURG (Reuters) – The South African Reserve Bank (SARB) will likely keep interest rates steady at its March 20 meeting as global trade risks and battles over the national budget keep policymakers in wait-and-see mode, a Reuters poll found on Friday.
The survey was conducted during a week when finance minister Enoch Godongwana’s revised bid for a more modest value-added tax increase in his proposed budget was rejected by major political parties.
South Africa’s budget may be tweaked further as the African National Congress-led minority government negotiates with other political parties to overcome differences over VAT.
Sixteen of 22 economists said the SARB would keep the repo rate at 7.50% at next week’s meeting, while six forecast a 25 basis point cut to 7.25%.
“The uncertainty around the budget reinforces our view that the SARB is likely to remain on hold in … March,” Goldman Sachs’ Andrew Matheny wrote in a note to clients.
Rates are expected to fall 25 basis points to 7.25% in May and then remain there for the rest of this year, poll medians showed.
Shannon Bold, senior economist at the Bureau of Economic Research, said the Reserve Bank is concerned about the potential upside risks to inflation, which include the proposed VAT hike.
Inflation, which rose to 3.2% in December from 3.0% in the previous month, is set to climb further, averaging 4.0% this year and 4.5% in 2026.
Bold said other risks included the possibility the Trump administration, which has been critical of a South African land reform policy, could place tariffs on imports from the country as well as second-round effects from a weaker rand.
Economic growth was forecast to expand 1.7% this year and 1.8% next year, the survey showed.
(Reporting by Vuyani Ndaba; Editing by Joe Bavier)
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