Macroeconomic Forecast South Africa

May 2008 | Macroeconomic Forecasts

In our view, there is a high risk of further interest rate hikes in 2008, which was highlighted by Central Bank Governor Tito Mboweni on May 28, when he stated during a seminar in Johannesburg that he could personally imagine a further 200bps increase in the benchmark interest rate (currently standing at 11.50%), in an effort to fight rising inflationary pressures. While we believe that the South African Reserve Bank will not necessarily implement those 200bps at the next MPC meeting in June, the statement nevertheless increases the risk of a hike of more than 50bps next month. In any case, the central bank's increasingly hawkish stance bodes well for our 2008 year-end interest rate forecast of 13.00% (implying another 150bps in rate hikes this year), with now suddenly potential upside risks to our projection.

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