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JP Morgan, Nedbank Expect SARB Hold in Nov with Hawkish Tone

SOUTH AFRICA
  • JP Morgan expect the SARB to keep the repo rate on hold in November, with the MPC likely to retain a hawkish tone. JPM’s view has been that the SARB’s inflation forecasts risk some upward revision, given the higher transportation costs than what is embedded in forecasts.
  • They say a rise in USD/ZAR (to around 20) or more certain deterioration in the food inflation outlook could bring them closer to tightening again. For now, however, they think the threshold is not reached and the soothing September core inflation reading probably increases the policy buffer.
  • With inflation expected to remain within the target range and monetary policy already very restrictive, the SARB will probably leave interest rates unchanged in November and start a mild easing in 2024, Nedbank say.
  • However, they add that the risk of further US interest rate hikes and its likely adverse implications for the rand, as well as the uncertainties around load-shedding, domestic weather patterns, and global oil prices, will keep the MPC in a hawkish state of mind.
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