MNI SARB Review - January 2022: SARB Tempers Its Hiking Cycle

Executive Summary

• SARB raises rates +25bps to 4.0%, marginally below implied market pricing for +32bp but in line with the Bloomberg consensus. Markets were somewhat surprised by a 4-1 MPC split in favour of a hike/hold.
• The MPC kept its forward guidance for a ‘gradual’ normalisation (+25bp increments), while the QPM model signalled one less hike at the end of the cycle. A 50bp hike was not considered at the meeting.
• Forecast revisions were marginally less hawkish than expected, with markets slightly disappointed by the more measured approach by the SARB – resulting in ZAR weakness post-decision as expected.

Full Review Here:

SARB Review 28.01.22.pdf

As expected, the SARB delivered at +25bp hike in line with its forward guidance for a gradual normalisation of policy, slightly disappointing investors hoping for a more hawkish MPC split signalling some preference for a 50bp hike. Inflation revisions came in a fraction lower than expected at 4.9%, while the QPM model signalled one less hike in the pipeline – resulting in ZAR weakness following the decision. Nevertheless, the MPC still voiced its concern over the path of inflation and, in our opinion, stands ready to adjust the pace of hikes should the need arise. Short-term risks to inflation were assessed to the upside with implied starting points for oil and USD/ZAR rising to $78/bbl & 15.60 respectively.