South Africa: 25bps cut looming – TD Securities

Sandeep Kanihama FXStreet Contributor

TD Securities analysts think that the balance of probabilities is slightly tilted towards a 25bps cut (59% probability) of the repo rate to 6.25% at today’s SARB meeting as opposed to the consensus expectation for a hold.

Key Quotes

“In our view, a cut would be justified for a number of reasons. Inflation remains low, 4.3% y/y in August, below the mid-point of the 3-6% target range and growth continues to be poor. (Yesterday's CPI data printed only 0.1ppt above consensus and only marginally decreases the chances of a cut by, say, 1-2% vs our 59% estimate).”

“Additionally, the global macro environment remains decisively dovish. However, there are several soft factors that may discourage the SARB from taking action. USDZAR moved over 5% higher since July meeting and remains undervalued by SARB standards; rising oil prices in the Middle East and Moody's scheduled review of sovereign rating on 1 November also represent risk factors that may convince the SARB to postpone easing to November.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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