MNI SARB Review - November 2021: Cautious MPC Eyes Gradual Hiking Cycle

Executive Summary

• SARB raises rates +25bps to 3.75% in line with market pricing & Bloomberg consensus in narrow 3-2 MPC split – marking the first increase from a unanimous hold in over 5 years.
• Short & medium-term inflation forecasts saw only moderate increases, while growth was revised lower in 2021 but remained steady in 2022 & 2023.
• Short-term risks to the CPI outlook from ZAR weakness, energy prices and wage demands were the deciding factor in the decision to raise rates – but the MPC alluded to a gradual normalisation trajectory as being sufficient to keep expectations well-anchored
• Sell-side institutions now anticipate 75-150bp in additional hikes in 2022

Full Review Here:

SARB Review 19.11.21.pdf

In a nail-biter decision, the SARB delivered its first rate hike after roughly 3 years of steady rates at 3.50% (3-2 split) – going against our expectations for a hold. This marks the first time a unanimous hold has been reversed in favour of a hike in five years and reflects just how close the decision was, with short-term risks to the CPI outlook from ZAR weakness, energy prices and wage demands being the straw that finally broke the accommodative camel's back.