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HSBC Expect SARB to Start Cutting Rates in Q3 2024

SOUTH AFRICA
  • HSBC say a sharp moderation in fuel price growth underpinned the decline in inflation in November and outweighed an uptick in both food inflation and core price pressures. The rise in core inflation, meanwhile, was broad-based.
  • A further 5% m/m drop in local fuel prices suggests headline price growth will ease further in December, they say. Beyond this temporary reprieve, however, HSBC think the inflation profile will be sticky, and average 5.4% over the next 12-18 months with material upside risks from El Niño, a weaker ZAR, electricity tariffs and other administered prices.
  • They keep their headline CPI forecast unchanged over the forecast horizon, averaging 5.9% this year, 5.4% in 2024 and 5.1% in 2025, some way above the SARB's current estimates. They also nudge their near-term core CPI forecast up by 10bp for 2023 to 4.9% but keep it unchanged for 2024 and 2025. Nonetheless, HSBC think policy rates have peaked but expect the SARB to only start cutting rates in Q3 2024.
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