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The South African Reserve Bank will likely lower interest rates by 25 basis points on Thursday, despite a larger-than-expected overnight move by the US Federal Reserve as it turns the screws on inflation.

Almost all of the 24 economists surveyed by Bloomberg expect Governor Lesetja Kganyago to reduce the rate from a 15-year high to 8 percent when he announces the decision after 3 p.m. at a press briefing north of Johannesburg.

It will be the SARB’s first easing since the pandemic in 2020.

A 50 basis-point cut by the Fed isn’t going to change that, according to economists at Rand Merchant Bank, who saw the six-member monetary policy committee constrained by the narrow gap between the US and South Africa’s real — or inflation-adjusted — rates of interest.

“We find this to be improbable,” Keabetswe Mojapelo and Manqoba Madinane said in a note in which they reiterated their view of a quarter-point reduction.

“The SARB has highlighted that real rates in South Africa are already low and do not offer the same buffer as in other emerging markets, limiting their capacity for aggressive cuts.”

South Africa’s real rates have reached the highest level in 19 years after price pressures cooled.

Data on Wednesday showed annual inflation slowed to 4,4 percent in August from 4,6 percent the prior month, widening the gap to the central bank’s policy benchmark to 385 basis points — the most since July 2005.

While the real rate “is relatively high, the difference between its real policy rate and that of the US is historically low, constraining the SARB’s actions significantly,” said Albert Botha, head of fixed income at Ashburton Investments.

Still, the decision may be close, with economists in a separate survey expecting the MPC to be split on the decision, with most members favouring a quarter-point reduction. – Bloomberg