SARB Delivers +25bp Hike In Line With Consensus, Boosts CPI Forecasts

SARB Statement Analysis:

• SARB hikes +25bp in line with consensus, upgrading its 2022 avg CPI forecasts and stating S/T risks to inflation are biased to the upside. 4/5 favoured a hike, while 1 called for a hold. Only +25bp hike or hold were discussed and MPC promised a gradual hiking cycle in +25bp increments in line with the QPM model.
• 2022 avg CPI: 4.9% vs 4.3% prior (slightly below market expectations for 5.0-5.3%), avg core inflation in 2022 at 3.8% vs 3.7% prior. Headline in 2023 & 2024 will be 4.5% (balanced at midpoint of the range). SARB does not anticipate CPI breaching 6%.
• USD/ZAR implied starting point revised up from 15.10 to 15.60. Brent price assumed at $78/bbl vs $73/bbl prior.
• 2022 growth remained the same at 1.7%, 1.8% in 2023 & 2% in 2024.
• Overall, a well-balanced meeting from the SARB, highlighting hawkish risks from oil, energy and administered prices while not falling behind the Fed. Focus will be on the path of inflation and external tightening for risks to a faster normalization, although this is not in the SARB’s base case.
• Link: https://www.resbank.co.za/content/dam/sarb/publica...