MNI SNB Review - June 2023: Stubborn CPI Means Not at Peak Yet

Highlights:

• Bank raised rates by 25bps, disappointing those who’d forecasted a 50bps step
• Short-term price pressures alleviating, but medium-term inflation still an issue
• Jordan flags more tightening may be required ahead

MNISNBRevJun23.pdf

In hiking rates 25bps, the bank have signalled that they are approaching the peak rate of the cycle, with a final 25bps hike in September likely to precede a prolonged pause with a deposit rate at 2.00%. The Bank also reaffirmed their language on currency, providing further evidence that FX management will remain a key channel through which they can control financial conditions.

The 25bps rate hike came despite partial pricing for a 50bps step, and accompanied a revision lower for short-term CPI projections – these ticked lower into year-end 2023 (2.0% for Q4 from 2.3% prev) but were revised higher across 2024 by 0.2/0.3ppts. This leaves the prospect for prices looking brighter into year-end and alleviates the need for any further 50bps steps at the bank – however medium-term CPI projections (which assume stable rates of 1.75%) show the need to do more to anchor expectations next year