'MPC is not likely to pull rates trigger'

24 March 2015 - 09:36 By Reuters

The Reserve Bank is likely to wait until the fourth quarter before raising interest rates, a Reuters poll shows, meaning no change at a policy meeting on Thursday. The bank has kept its benchmark rate at 5.75% since July as the economy is struggling and inflation is in check.However, economists expect the Reserve Bank will have to raise rates eventually because the rand, which has hit 13-year lows against the dollar this year, is likely to come under more pressure as the US starts raising interest rates.The poll forecast the bank will raise its repo rate by 25 basis points to 6% in the fourth quarter.A rise in US rates will potentially draw capital flows away from South Africa and other emerging markets, although the Federal Reserve signalled last week it is not ready to tighten policy imminently, giving the Reserve Bank room to keep policy unchanged for now."For South Africa we think they will hold off for some time," said John Ashbourne at Capital Economics."Inflation in South Africa fell to a multiyear-low. We think there is space to keep things on a slow trajectory," he said.Consumer price inflation slowed to 3.9% in February, from 4.4% in January.South Africa has been hit by chronic power shortages and the government downgraded its 2015 economic growth forecast last month to 2%, from 2.5%. ..

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