Investec's interest rate outlook on SA

Investec's Chief Economist, Annabel Bishop, recently sat down with CNBC Africa to discuss the current economic landscape in South Africa and the outlook for interest rates ahead of the NPC decision. Bishop expressed that despite the credit rating downgrade, the impact on the bond market has been limited, with the rand strengthening post downgrade. She indicated that the Reserve Bank is likely to maintain interest rates, as they have set a high benchmark for rate cuts. The expectation is for a flat outlook, with the possibility of a slight rate hike towards the end of 2018 due to anticipated US interest rate increases. Bishop highlighted that the current global risk-on environment has led to foreign investors showing interest in South African debt, contributing to the rand's rebound. She also mentioned that inflation is expected to moderate this year due to improved agricultural output, but the Reserve Bank focuses on inflation projections for the medium term, aiming for around five and a half percent. Despite some optimism about Finance Minister Malusi Gigaba's rhetoric, Bishop emphasized the importance of concrete actions to restore investor confidence and retain crucial foreign investment in South African debt. The uncertain economic policies, coupled with a downturn in business confidence, have hindered growth prospects, with projections indicating below-average GDP growth and lagging behind compared to global and regional growth rates. The potential risk of further credit rating downgrades poses a threat to the country's economic stability and could lead to significant capital outflows.