Why the SA Reserve Bank hike took the market by surprise

The South African Reserve Bank (SARB) announced a 50 basis point repo rate increase on Thursday, 30 March – 25 basis points more than the market expected.

An interest rate hike was a near-inevitable outcome given the recent rise of inflation and the Federal Reserve’s interest rate hike last week.

The article above and the one below are less than a day apart – it shows you that we can speculate but we can never be certain. 3 min read

Reserve Bank expected to hike interest rates to a 13-year high

Economists in a Bloomberg survey expect the five-member monetary policy committee to raise the key rate to 7.5% from 7.25%.

The most popular view among economists is for a unanimous decision, though some members of the panel are seen voting for a bigger move or no change. Forward-rate agreements used to speculate on borrowing costs show traders are only pricing in a 64% chance of a quarter-point hike.

3 min read.

Are South African banks at risk of their own crisis? Examining the threats – Katzenellenbogen

This article discusses the risks facing South African banks, including the possibility of a banking crisis caused by a lack of confidence in the government and the economy. It highlights the importance of effective regulation and the need to reduce the country’s budget deficit to mitigate these risks. It also discusses the potential impact of the country’s placement on a “grey list” due to money laundering and terrorist financing, as well as the risk of a collapse of the national power grid. Ultimately, the article suggests that there are increasing scenarios that could contribute to bank failure in South Africa. 8min read.

Central banks will prioritise inflation over growth

2022 was a landmark year for monetary policy. For some time, central banks had blamed rising headline inflation on a series of shocks: post-Covid supply chain issues, along with higher food and energy prices related to the war in Ukraine. These factors were seen as transient, and so policymakers felt that tightening monetary policy would not have much impact. However, it became apparent that these temporary cost increases had triggered pressures elsewhere, and that they had spread to other parts of the economy. Suddenly, inflation in services sectors was rising sharply, with wage growth being a major contributor.

Central banks acknowledged that the external shocks could no longer be looked at in isolation.

You must read this macroeconomic view of the past decade by Azad Zangana, Senior European Economist and Strategist at Schroders. Also posted under investments. 10min read.

BHP Group Seeks to Delay $44B Brazil Dam Court Case in London

The world’s biggest miner by market value is being sued by around 720,000 Brazilians over the 2015 collapse of the Fundao dam, owned by the Samarco joint venture it holds with Brazilian iron ore mining company Vale.

Should insurers be more vigilant in assessing infrastructural and climatic risk?  2min read.