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Standard Bank Group
The SA Daily 21 September 2018

SARB CPI within range

  • The South African Reserve Bank (SARB) kept the repo rate unchanged at 6.5% yesterday. The rhetoric was hawkish, with the vote nearly evenly split. Four Monetary Policy Committee (MPC) members favoured steady rates and three members favoured a rate hike.
  • The SARB’s quarterly inflation forecasts never breach the 6% target ceiling. Its inflation forecasts peaks at 5.9% in Q2:19 and average inflation forecasts are now 4.8% in 2018, 5.7% in 2019 and 5.4% in 2020. The SARB acknowledged the weakness in demand-pull inflation pressure; and the inflation expectations surveyed by the BER increased only marginally despite severe exchange rate and currency shocks.
  • The SARB has set the scene for a possible interest rate hike, but in our view the inflation prognosis does not justify one yet. Given continued downside surprises in economic growth and inflation, and inflation expectations that are still reasonably contained despite severe inflationary shocks, the SARB should in our view delay any interest rate hikes for now. We are still not pencilling in a rate hike in the coming months (see Hike staved off, of 20 September by Elna Moolman).

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