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SARB Meeting/Statement Analysis: Well-Balanced, but Dovish Meeting Amid Fragile Sentiment
- Overall, a well-balanced meeting from Kganyago, given the prevailing economic realities on the ground in SA post-unrest.
- The statement was little vs the prior meeting with the exception of the GDP and inflation forecasts – which supported today's more dovish/accommodative tone
- End-2021 headline CPI revised higher to 4.3% vs 4.2% prior, core lower to 2.9% vs 3.0% prior
- although Kganyago noted that inflation risks were tilted to the upside in the near-term, he reiterated that the SARB would look through transitory factors towards the medium-term disinflationary trajectory (2022 avg CPI revised from 4.4% to 4.2%).
- These price pressures were labelled as mostly contained/anchored and may precipitate a prolonged period of lower rates for longer – adding weight to our base case for rates to remain unchanged until 1Q22
Market Reaction:
- As per our expectations, we've seen a minor unwind in hawkish expectations priced into ZAR resulting in a move higher in USD/ZAR.
- Similarly, the initial reaction to the decision in SAGBs precipitated a bull steepening in the curve with the 2Y dipping -6.4bp, while the long end is seen +3.4-4.2bp higher as hawkish expectations price themselves out.
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.