MNI China Daily Summary: Wednesday, June 19

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Analyst Views Regarding Start of SARB Rate Cuts Far from Unanimous

SOUTH AFRICA
  • JP Morgan say today’s inflation report is marginally dovish in as far as it improves the balance of risks around the inflation outlook. Nevertheless, incorporating the December CPI report leaves JPM’s inflation forecast unchanged as the small downside surprise is offset by a now likely larger February petrol price increase.
    • The SARB likely will be comforted by the December reading, although this similarly is unlikely to move the needle on its forecasts, JPM say. They continue to look for a first interest rate cut in May with a base case of 75bp (maximum 100bp) in cumulative cuts this year.
  • Goldman Sachs see scope for a deeper cutting cycle than priced by the market. Their baseline is for the first cut to be delivered at the March MPC meeting and for 175bp of rate cuts down to a terminal rate of 6.50% by end-2025.
    • They maintain their forecast for inflation to decline from an average of 5.9% in 2023 to 4.4% in 2024, well below SARB/consensus of 5.0%. Underlying this forecast for deeper disinflation is a view that the economy is operating significantly below potential.
  • Nedbank expect the the MPC to start a mild policy easing in May, followed by further cuts at each of the following meeting, leaving the repo and prime rates and 7.25% and 10.75% by the end of 2024.
    • However, they note that the first cut could be in July if election jitters hurt the rand and the US Federal Reserve starts cutting later than the currently expected May move.
  • HSBC expect the SARB to keep its policy rate unchanged at 8.25% at tomorrow's MPC meeting amid a sticky inflation outlook with the statement likely to adopt a cautious tone. They specify that they anticipate a shallow rate cutting cycle to kick-off from September 2024.
    • HSBC nudge their average headline CPI forecast 10bp lower to 5.3% y/y for this year on a slightly softer path for food prices but keep it unchanged at 5.1% in 2025, leaving their core inflation estimate unchanged at 4.8% y/y over the forecast horizon.
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