The latest set of business surveys suggest that, having contracted in the first quarter of this year, South Africa’s economy continued to struggle in Q2. Inflation remains a concern but with activity so weak and the rand now stable, the Reserve Bank is likely to take a more cautious approach to raising interest rates than we had previously anticipated. We now expect policy rates to be raised by a further 50bp to 6.0% by the end of this year (from a previous forecast of 6.5%). Our end-2015 forecast is unchanged at 7.0%.
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