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Brace for 50bp rate hike, warn economists

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Photo: iStock
Photo: iStock

Cape Town - All eyes will be on the South African Reserve Bank's (Sarb's) monetary policy committee (MPC) when it announces the first interest rate decision of the year on Thursday. The general consensus among economists is that the outcome will be a 50 basis-point hike.

"We forecast a larger incremental 50bp (basis-point) rate hike this time, given both an extended breach of the 6% target ceiling in our CPI (consumer price index) outlook and heightened inflation risks (in ZAR and food prices mostly)," said Citi Research on Monday.

"No matter which path the Sarb chooses, we see a total 100bp (basis point) in rate hikes in 2016. To do a 50bp hike now makes sense to us for it gives the MPC more options in March (pause, +25bp or +50bp) which keeps it ahead of the curve."

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