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MNI SARB Preview - September 2021: SARB to Hold at 3.5%, Inflation Vectors Still Contained

The SARB is expected to keep its key rate unchanged at 3.50% this week, with inflation still broadly contained within the 3-6% target range on both a near and medium-term basis Markets will eye the Bank's assessment of the recent GDP rebasing and discussions of a potential move towards a narrower 3-4% inflation targeting framework.

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EXECUTIVE SUMMARY

  • SARB to keep policy on Hold at 3.5% (unanimous decision), Focus will be on GDP rebasing assessment and discussion of narrower 3-4% inflation targeting framework
  • Policy to remain accommodative to 1Q22 and potentially beyond with inflation vectors still contained on a near and medium-term basis: 2022 avg inflation was revised lower to 4.2% vs 4.4% at the prior meeting - in line with the midpoint of the range
  • Fragile recovery narrative and acutely high unemployment will likely keep the SARB from reactively hiking policy rates in the near-term and hampering the recovery
  • Immediate instatement of the narrower inflation target would be construed as a hawkish development by markets, but we do not see Kganyago delivering the change at this meeting

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SARB Preview 23.09.21.pdf

The SARB is expected to keep its key rate unchanged at 3.50% this week, with inflation still broadly contained within the 3-6% target range on both a near and medium-term basis. This, alongside a muted aggregate demand impulse, structurally high unemployment and a fragile recovery narrative, informs our base case for the SARB to remain on hold out to 1Q22 and potentially beyond.