MNI SARB Preview - January 2021: Seen on Hold In Nail-Biter

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SARBPrevJan21.pdf

The SARB is expected to keep rates on hold at 3.5% Thursday in what is pegged to be an extremely tight call as dovish factors creep into the SARB's value function. Nevertheless, persistent fiscal risks and the MPC's broadly hawkish preference for looking through transitory disinflation pressures may prove dominant. Since the November meeting, headline inflation has moderated towards the lower end of the 3-6% target - expected at 3.0% in Dec (3.2% prior).

Macro tailwinds have also supported a firmer ZAR, translating to a lower implied starting point for this meeting to ~15.50 from 16.50 in November and arguably higher risks for a near-term cut to 3.25%. A 3-2 split in the MPC and expectations for a -3.3% 1Q21 GDP print on tighter Covid restrictions and weakening high-frequency data in Dec also make for a true nail-biter.