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

According to analysts at TD Securities, the consensus expects the SARB to keep its policy rate on hold at 6.5%, but they we think the decision is a closer call than the survey might suggest.

Key Quotes

“On balance we also expect the policy rate to be kept on hold. The principal reason why we think they will hold is that the MPC makes a point of never hiking rates to influence the rand exchange rate. They focus on the inflation projections and if rand weakness causes them to move too high, then will preemptively hike rates.”

“Also, the MPC has recently been making a point of saying that they try to look through first-round effects and focus on possible second-round effects. We think that by the November meeting the SARB will have a clearer idea about how things lie. However, in any event, the message coming out of the MPC meeting will be distinctly hawkish.”