Economists predict SARB to keep benchmark interest rate at 7.5%

Amidst the backdrop of economic uncertainty both globally and at home, investors and analysts have been eagerly awaiting the decisions of major central banks. Last night, the Federal Reserve opted to maintain its benchmark interest rate, a move that was expected but still crucial in the face of mounting concerns about a slowing economy and stubborn inflation rates. In light of this, all eyes are now on the South African Reserve Bank (SARB) as Governor Lesetja Kganyago gears up to present the monetary policy committee's decision this afternoon. To provide insight into the latest developments, Annabel Bishop, Chief Economist at Investec, shared her perspective with CNBC Africa. Let's delve into the key points discussed in the interview. Firstly, Annabel noted that the Federal Reserve's decision to moderate its inflation and GDP growth forecasts has played a role in easing expectations of interest rate cuts in the US. This shift, along with a more stable global economic outlook, has had a positive impact on currency markets, including the strengthening of the South African rand. Despite initial uncertainty about whether the Federal Reserve's stance was dovish or hawkish, Annabel suggested that the central bank's confidence in the economic indicators signaled a more neutral position. While inflation levels are not yet at the target, the Fed remains optimistic about the future trajectory. With regards to the term 'transitory' resurfacing in the Fed's vocabulary, Annabel highlighted the cautious approach taken by the central bank amidst ongoing policy changes under the Trump administration. The word 'stagflation' also made its way into the discussion, emphasizing the delicate balance the Fed must strike in managing opposing economic forces. Annabel underlined the importance of closely monitoring the US economy's performance against a backdrop of soft data and potential challenges from trade policies. She pointed out that the Fed's dual mandate puts them in a challenging position, especially when considering conflicting signals from the economy. Moving beyond the US, Annabel touched on the global economic landscape, expressing concern over downgraded growth projections, particularly in regions like Europe and China. Despite stimulatory measures being implemented, the overall outlook remains subdued, underscoring the need for cautious optimism. As the South African Reserve Bank prepares to announce its decision, focus shifts to inflation forecasts and the potential impact of global inflation dynamics on the local economy. Annabel highlighted the significance of the VAT increase and the SARB's approach to mitigating external inflationary pressures. The uncertain global environment and the nuanced interplay of economic factors pose challenges for central banks across the globe. In the face of structural issues hindering growth in South Africa, including transport and logistical constraints, the SARB faces a complex landscape. Annabel's insights shed light on key considerations for the central bank as it navigates the intricacies of the current economic climate. With economic uncertainty prevailing on a global scale, the role of central banks in steering policy and fostering stability becomes increasingly vital.