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Economists expect interest rate cut

The central bank last cut rates in July 2017, highlighting an improving inflation outlook, but warning of a slowdown in economic growth.

FILE: SA Reserve Bank Governor Lesetja Kganyago. Picture: GCIS

JOHANNESBURG - Indebted South Africans could get some welcome relief on Wednesday if the Reserve Bank’s monetary policy committee (MPC) cuts interest rates as expected.

The central bank last cut rates in July 2017, highlighting an improving inflation outlook, but warning of a slowdown in economic growth.

But the tax and VAT hikes announced in the February budget are likely to have an impact on the outlook going forward.

Economists say that the chances of an interest rate cut have increased and expect a drop of 25 basis points.

This would lower the repo rate to 6.5% and the prime lending rate to 10%.

Citi Bank's South Africa economist Gina Schoeman says that since the last MPC meeting, the country’s economic prospects have improved.

"A lot of inflation risk has reduced and by that we mean that the currency, the rand, has a far more stronger and stable outlook now that President Cyril Ramaphosa has ticked a lot of boxes very quickly."

Consumer inflation, which the bank uses as a guide for deciding rates, has remained within the bank's target of 3% to 6% for the past year and is expected to average 4.9% this year.