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Citi See Increased Risk Of Another 50bp SARB Hike As Market Digests Inflation Data

SARB

Following this morning's inflation print, Citi write that they cannot rule out the possibility of another 50bps hike from the SARB - with the data also pushing back the timeframe for any rate cuts this year. They watch the April CPI release ahead of the May meeting for any confirmation on rate hike size as well as the potential for the terminal rate.

  • Market participants added SARB rate-hike wagers in the wake of today's expectation-beating CPI outturn, with headline CPI staying comfortably above the central bank's +3.0%-6.0% Y/Y target range despite recent hawkish communications.
  • The local FRA curve shifted higher after the release, with contracts hitting new cyclical highs. The 2x5 FRA vs. 3-Month JIBAR spread has widened to around 44bp amid the perception that a 50bp move is on the table.
  • The next CPI report is due on May 24 and will be closely watched, given that it comes out on the eve of the SARB's monetary policy decision.
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