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  • 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.