South Africa: SARB to keep its policy rate on hold at 7.0% - TDS

In line with the consensus, analysts at TDS expect the SARB to keep its policy rate on hold at 7.0% today.

Key Quotes

“The South African economy remains weak, inflation performance in recent months has been good, and the rand, in spite of being buffeted by a fair bit of political noise, is more or less unchanged since the May MPC meeting. So we think there is a reasonable case for the SARB cutting its policy rate. However, the MPC has been taking a cautious approach to monetary policy, wary, amongst other things, of the possibility of a sharp rand sell-off due to negative political developments and/or a ratings downgrade.”

“The press statement of the May meeting said that “a reduction in rates would be possible should inflation continue to surprise on the downside and the forecast over the policy horizon be sustainably within the target range”.  We think that the MPC will want to wait further in order to become more confident that the longer-term inflation outlook is firmly anchored within the 3-6% target range. However, we expect the language in the press statement to adopt a more dovish tone, perhaps pointing to the possibility that rates could be cut at the September meeting.”