MNI BRIEF: Canadians Fuzzy On How BOC Hikes Slow CPI, Government's Role

CANADA FLASH MAY GDP +0.1% ON FACTORIES AND REAL ESTATE

MNI China Daily Summary: Friday, June 28

MNI BRIEF: BCB Evaluating Real Depreciation Impacts - Galipolo

MNI BRIEF: PBOC Pledges to Curb Any Overshoot Of The Yuan: MPC

MNI: PBOC Net Injects CNY40 Bln Via OMO Fri; Rates Unchanged

MNI: BAKER HUGHES US RIG COUNT 581; OIL RIGS 479; GAS RIGS 97

EZ/UK T-Bill Calendar: Germany, France Auction on Monday

EZ/UK Bond Supply Calendar: BoE APF on Monday

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

SARB React: MPC Acts to Stem ST Risks to the CPI Outlook, SAGBs Bear Flatten

SOUTH AFRICA
  • The SARB delivered its first rate hike today after a year of steady rates at 3.50% (3-2 split) – going against our expectations for a hold.
    * GROWTH: FY21 GDP forecast was reduced to 5.2% from 5.3%, while 2022 & 2023 remained steady at 1.7% & 1.8% respectively. Medium term growth risks assessed to the downside, output gap unchanged.
  • CPI: FY 21 CPI forecast revised higher to 4.5%, alongside 2022 CPI at 4.3% (4.2% prior) & 2023 at 4.6% (4.5% prior) - smaller than expected increases to the medium-term. Balance of risks were assessed to the upside.
  • Narrow split shows how close this decision was, a weaker ZAR, higher domestic import tariffs and escalating wage demands seem to have been the factor that tipped the scales in favour of a hike – rather than growth fragility and mostly balanced medium-term inflation vectors.
  • The committee seemed comfortable to raise rates in a gradual manner (implying +25bp increments), but the market reaction to this may see the SARB pressed to deliver above consensus if it wishes to see the impact reflected in ZAR. 3x6 FRA-Jibar spread has risen to +59.7bp following the decision.

Market React:
  • USD/ZAR was little changed as a result of the decision, with +16bp already priced in. The main move came from the rates market with the front-end bear flattening +6.3bp and the 10-30Y section dipping slightly.
  • Broad $ strength sent the cross through 15.70, with the next major level to the topside being 16.00-16.20. High real yields and attractive terms of trade have helped cushion ZAR from extensive weakness this year, but it still remains vulnerable in a strong USD environment, given its high-beta status.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage

To read the full story

Close

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.