MNI SARB Review - November 2023: Dovish Vote Shift, Hawkish Talk

Executive Summary:

• The SARB kept the repo rate unchanged at 8.25%.
• The vote split shifted to 5-0 from 3-2 in September.
• Governor Kganyago flagged continued concern with upside risks to inflation.

MNI SARB Review - November 2023.pdf

The South African Reserve Bank (SARB) left the repo rate unchanged at 8.25% in a unanimous decision, which represents a dovish shift from September’s 3-2 vote split, where two dissenters were calling for a 25bp rate hike. The central bank delivered minor adjustments to its macroeconomic forecasts, with the inflation path seen slightly lower than before. However, Governor Lesetja Kganyago balanced the dovish signal sent by the shift in vote split by reiterating that the risks to the inflation outlook remain tilted to the upside and the Monetary Policy Committee (MPC) stands ready to take action should they start to materialise. The next meeting has been scheduled for January 25.

The combination of hawkish tone with a dovish shift in vote split and an on-hold decision spell a period of unchanged interest rates for the coming months. The SARB considers its current monetary policy settings to be sufficiently restrictive to eventually bring inflation to the target and, barring any major price shocks, the next policy move is likely to be a cut. Meanwhile, the MPC’s communications point to a continued sense of concern with upside risks to the inflation outlook, which should provide a sufficient barrier to starting an easing cycle in early 2024. The outlook for monetary policy may be affected by the imminent replacement of Deputy Governor Kuben Naidoo, perceived as a relatively dovish policymaker, with groundwork being laid for the succession process.