Why South Africa can cut rates this week

Rate cuts - [http://www.walshassociates.co.nz/wp-content/uploads/2016/04/interest-rates.jpg]

For all its economic troubles, South Africa has managed to keep inflation within its central bank’s target band.

The latest numbers on Wednesday confirmed this. As the following graphic shows, inflation has been within the South African Reserve Bank’s 3 to 6 percent band for most of the past five years and is again.

After rising above target last year and the early part of 2017, it has now been within target for five consecutive months. That allowed the bank to cut in July and is expected to lead to a repeat performance at least this Thursday.

The latest Reuters poll suggests the SARB will cut its benchmark repo interest rate by another 25 basis points, taking it to 6.50 percent.

The rest of the economy, in the meantime, could probably do with a monetary boost. As this graphic shows, GDP and unemployment have been heading in opposite — and adverse — directions.