South African private sector credit growth jumped to 22,62% year-on-year in March, knocking expectations of a slowdown in spending and hardening the case for more interest rates increases. Central bank data on Wednesday showed growth in demand for credit leapt from 20,79% in February, while M3 money supply growth edged higher to 21%.
Analysts said the data, following hard on the heels of strong inflation numbers last week, would push the Reserve Bank towards further monetary policy tightening.
”Nobody is going to like this. Everyone was hoping for lower figures,” Brait Merchant Bank economist Colen Garrow said.
”This gives the Reserve Bank ammunition for a rate hike at their June meeting. The numbers should have slowed down much more.”
The rand was marginally weaker after the data but government bond yields surged as investors raised the probability of more rates hikes.
The yield on the 2015 bond was five basis points up at 9,515% for the session at 6.32am GMT, after touching 9,56% earlier.
The central bank raised its repo rate by 50 basis points to 11,5% earlier this month, bringing to 450 basis points the total increases since June 2006.
Strong inflation data and hawkish comments from Reserve Bank Governor Tito Mboweni had raised speculation rates will continue to rise.
Mboweni last week even hinted that the monetary policy committee may not wait for its scheduled June meeting to move on rates again. A Reuters poll forecast that private sector credit growth would come in at 20,5%, while the annual growth in M3 — which often points to inflationary pressures in the economy — was seen at 20,7%. – Reuters