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.”

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