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SOUTH AFRICA: JP Morgan Continue to Expect 25bp Rate Cut in January

SOUTH AFRICA
EM BulletBulletEmerging Market News

JP Morgan’s outlook continues to be for a 25bp cut to 7.50% next week, and they tentatively retain their further projection of a further reduction in 3Q25. Incoming inflation reports continue to be more favourable than projected by the SARB, serving as an important offset to the potential upside risks from FX pass-though, they say.

  • For example, JP Morgan think USD/ZAR at around 18.75 could add 0.25ppts to 4Q25 forecasts relative to the just below 18.00 incorporated by the SARB. However, with headline inflation in 4Q24 now below the SARB’s projected level and core inflation also lower than pencilled-in, part of this impact is mitigated, JPM say.
  • JP Morgan now look for inflation to average 4.1% this year with core inflation at 3.8%. Their base case sees a rate cut next week when they expect the SARB to emphasis data dependence with little forward guidance, with a further cut in July provided USD/ZAR does not significantly and persistently rise above 19.00-19.50 in 1H25.
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JP Morgan’s outlook continues to be for a 25bp cut to 7.50% next week, and they tentatively retain their further projection of a further reduction in 3Q25. Incoming inflation reports continue to be more favourable than projected by the SARB, serving as an important offset to the potential upside risks from FX pass-though, they say.

  • For example, JP Morgan think USD/ZAR at around 18.75 could add 0.25ppts to 4Q25 forecasts relative to the just below 18.00 incorporated by the SARB. However, with headline inflation in 4Q24 now below the SARB’s projected level and core inflation also lower than pencilled-in, part of this impact is mitigated, JPM say.
  • JP Morgan now look for inflation to average 4.1% this year with core inflation at 3.8%. Their base case sees a rate cut next week when they expect the SARB to emphasis data dependence with little forward guidance, with a further cut in July provided USD/ZAR does not significantly and persistently rise above 19.00-19.50 in 1H25.