All eyes on the Reserve Bank for first rate decision of 2019

In general, it seems economists are of the opinion that the SA Reserve Bank (SARB) will likely keep the repo rate unchanged this time.

SARB's Monetary Policy Committee (MPC) has its first meeting for 2019 this week and governor Lesetja Kganyago is set to announce the rates decision at 15:00 on Thursday.

At its previous meeting in November 2018, the MPC announced a 25-basis points increase in the repo rate. This was the first increase since March 2016 and brought the repo rate and prime lending rates to 6.75% and 10.25%, respectively.

The repo rate is the benchmark interest rate at which the central bank lends money to other banks. Changes in the repo rate affect the prime lending rate, which is the rate banks use as a starting point to calculate interest rates for their clients.

PwC said earlier this week that the central bank was unlikely to raise rates again this time due to fears around the global economy dampening oil prices and offering a petrol price reprieve, "US equities jitters" that may slow down the pace of the US Fed's monetary policy tightening, and the SA economy's weak demand pressures.

PwC noted, however, that the SARB had signalled at the beginning of the interest rate hiking cycle in November that it may raise rates three times by 25 basis points each before the end of 2020.

Investec economist Annabel Bishop, in a note to clients, also indicated that she expects interest rates would remain unchanged for the first half of 2019.

"Contrary to the timing of the last MPC meeting in November 2018, the start of 2019 has seen risk-aversion abate somewhat in global markets as commentary from US monetary authorities has become less hawkish," she said.

Domestically, risks for SA abound, said Bishop, ranging from fiscal performance and the threat of credit rating downgrades, to the upcoming national election. 

Nedbank Corporate and Investment Banking also said it expected the central bank to keep interest rates on hold on Thursday.

"We see marginally lower headline inflation in 2019, but believe the bias is still for a hike by the SARB later this year," it said in a statement.

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