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Forward Rates Signal Tighter SARB Stance, Inching Closer to 50bp Hike at Next meeting

  • Rising energy prices are placing notable pressures on a SARB attempting to maintain a balanced tightening cycle in +25bp clips.
  • 1x4 FRA-Jiba3m spreads have risen to +41.3bp this morning vs +32.3bp at the start of March.
  • 3x6 FRA-Jiba3m spreads have also risen +24bp from +65.8bp to 89.8bp, while 9x12 FRA-Jiba3m spreads are now at +206.8bp after bottoming out at 135bp mid-Feb.
  • Although ZAR has remained mostly stable due to higher commodity prices, keeping FX passthrough to inflation low, the rise in fuel prices is expected to put substantial upside pressure on average inflation forecasts for 2022 & 2023.
  • BNP Paribas recently upgraded its FY22 forecast to 6.0% average vs 5.2% prior.
  • Markets are beginning to anticipate an acceleration in the pace of tightening from the SARB, but SA’s moderate growth trajectory remains a concern for curtailing the recovery on exogenous energy drivers that cannot be curbed by domestic rate hikes.
  • 1x4 FRA-Jiba3m

    9x12 FRA-Jiba3m

MNI London Bureau | +44 020-3983-7894 |
MNI London Bureau | +44 020-3983-7894 |

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