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Goldman Sachs Think 50BP Hike Will Mark Tightening Cycle End Barring Shocks

SARB
  • Goldman Sachs continue to expect a 50bp hike from the SARB tomorrow (accompanied by hawkish rhetoric), but think that this will mark the end of the hiking cycle barring further shocks, e.g., to the exchange rate.
  • Headline inflation declined (from 7.1%yoy to 6.8%yoy) and core inflation edged higher (from 5.2%yoy to 5.3%) in April, with both outturns surprising consensus expectations to the downside.
  • Within core inflation, medical aid increased further from 7.5%yoy to 8.3%yoy (above GS expectations) but this was offset by a very soft reading for narrow core goods/services (which on their measure declined from 5.1%yoy to 4.8%yoy).
  • Among non-core factors, food inflation notably decelerated sequentially (from 1.0%mom to 0.8%mom, its slowest pace year-to-date) and was close to flat in annual terms at 13.9%yoy.
  • Goldman Sachs think this likely marks the peak for food inflation, which they expect to decline meaningfully in the coming months and drive headline inflation lower (to 5.8%yoy by June).
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