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MNI SARB Preview - September 2023: SARB To Keep Pressing Pause

Executive Summary

  • Consensus looks for another on-hold rate decision from the SARB.
  • South African inflation has been cooling faster than expected.
  • However, upside risks to the price outlook remain.

Full preview including summary of sell-side views here:

MNI SARB Preview - September 2023.pdf

The South African Reserve Bank (SARB) is expected to stand pat on interest rates this week as inflation cools faster than expected, headwinds to economic growth abound, while South Africa’s fiscal outlook deteriorates. As a result, the central bank will likely look through upside risks to the inflation path, such as persistent currency weakness and higher oil prices, keeping the main policy rate unchanged at 8.25%. The focus will be on the updated macroeconomic forecasts as well as the evolution of the SARB’s rhetoric.

In our view, the most likely scenario for the SARB is to keep interest rates unchanged and continue to verbally reaffirm its inflation-fighting credentials. The SARB should be satisfied with the evolution of the inflation path but risks remain tilted to the upside and are not yet dissipating. Against this backdrop, the MPC will want to stick with its wait-and-see stance, maintaining readiness to react to fresh developments in either direction, with the focus on anchoring inflation and inflation expectations close to the mid-point of the target band.

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