Trump return won't stop cut

Uncertainties in wake of his victory not expected to prevent central bank.

- Liesl Peyper

The return of Donald Trump as president of the US, along with the uncertainty surrounding its global economic impact, is unlikely to deter the South African Reserve Bank (Sarb) from cutting interest rates on Thursday.

The central bank will hold its monetary policy committee (MPC) meeting—the last of the year—this week, and it is widely anticipated that the repo rate will be lowered by another 25 basis points.

No reason not to cut

Lisette IJssel de Schepper, chief economist at the University of Stellenbosch's Bureau of Economic Research, notes that concerns about Trump's policies potentially being inflationary and leading to sustained dollar strength (and a weaker rand) make a 50 basis point rate cut in South Africa unlikely.

However, these uncertainties are not expected to prevent the Sarb from implementing a rate cut altogether.

Currently, there are sufficient reasons for the Sarb to proceed with a 25 basis point reduction, she notes.