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MNI SARB Preview - July 2022: Balance Tilts in Favour of 50bps

Executive Summary:

  • SARB likely to tighten policy further, with CPI now above top-end of target range
  • However, a number of sell-side analysts see a strong possibility for a larger hike of 75bps
  • A 50bps move is fully priced, with a 75bps move around 40% priced

Full preview here:

MNISARBPrevJul22.pdf

In an interview with MNI in late June, SARB’s Naidoo acknowledged that the bank are in the midst of a tightening cycle, stating that “we are in the phase of taking out foot off the accelerator”. This makes a rate rise of at least 50bps a near certainty this week and would be inline with the pace established at the May rate decision.

Arguing against a 50bps rate rise this quarter, is the expectation that CPI will rise to 7.3% in June, opening the largest gap with the upper-end of the inflation target since the Global Financial Crisis. This is comfortably above model assumptions presented in May, which saw CPI averaging 5.9% this year, and saw core at just 3.9%.

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