South Africa: SARB to cut its policy rate again by 25bps - TDS

Analysts at TDS expect the SARB to cut its policy rate again by 25bps bringing it to 6.5%.

Key Quotes

“This is in line with the consensus, although we don’t think the decision is quite as clear cut as the Bloomberg survey would suggest with only 4/24 respondents expecting no change. At the July meeting, the MPC surprised the markets by cutting by 25bps, saying that future decisions will be data dependent. Recent inflation data has been good and core inflation fell further in August running at 4.6%, just above the centre of the 3-6% target band.”

“On the other hand, on a trade-weighted basis ZAR is down 4.6% since the last meeting and Brent oil in rand terms is up 15%. In Q2 GDP growth rebounded to +2.5% Q/Q (ann) from –0.6% in Q1, but more recent data points to more sluggish growth in Q3. At the July meeting the MPC said that the rate cut would “provide some relief at the margin”.  All in all we do not think the data will prevent the MPC from providing more relief, but if they do not cut  then we would expect a cut at the December meeting.”