Central Banks: CBRT and SARB decisions in focus today – Rabobank

Analysts at Rabobank are looking forward to central bank decisions in South Africa and Turkey and their senior EM FX strategist Piotr Matys expects the South Africa Reserve Bank to keep its policy rate unchanged at 6.50% despite inflation falling to a nine year low and the bleak outlook for the economy.

Key Quotes

“The SARB faces a moral dilemma as cutting rates could further discourage the ruling ANC from tackling structural issues that have been the main cause of persistently low growth and the unemployment rate close to 30%.”

“Also today the central bank of Turkey will announce its decision. If the CBRT had the same degree of independence as the SARB, the policy rate would have probably remained unchanged at 12%. This is not, however, the case. The CBRT is under pressure to lower interest rates further to stimulate lending and achieve the official GDP growth target set at 5%. Piotr, therefore, anticipates Governor Uysal to trim the 1-week repo rate by at least 50bps to 11.50%. Those two decisions will reflect substantial difference in terms of independence of the SARB and the CBRT.”