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Summary of Sell-Side Views Following SARB's 75bps Hike:

SOUTH AFRICA
  • Commerzbank write that the vote split underlines that the majority of the council members take a hawkish stance and demonstrated the SARB’s determination in its fight against excessive inflation. They conclude that in view of domestic risks, the rand is likely to have difficulties to stand its ground and may come under depreciation pressure in case of risk-off.
  • Nedbank write that their projections show that inflation will remain above the target for the rest of 2022, averaging 6.8% by the end of the year. Given this outlook, they expect the SARB to hike by 50 bps and 25 bps at its September and November meetings. However, the likelihood of a more aggressive interest rate path remains high.
  • Goldman Sachs forecast a further 100bp of rate hikes by year-end to a terminal 6.50% policy rate (in our baseline delivered in two 50bp increments). Given the hawkish surprise to the July CPI print and the inflation expectations readings, we see risks tilted toward larger and more front-loaded tightening. In their view, the hawkish dissent at the July MPC meeting (1 member supporting a 100bp hike) likely comes as a significant hawkish surprise to market expectations.
  • JPM view a further 75bp move in September as likely (previously 50bp) and see the policy rate peak reached already in 1Q23 (previously mid-23) at an unchanged 7.25%. While not explicitly referenced, they sensed that Governor Kganyago was eager for the SARB not to be seen as behind the curve, forced to later play catch-up. Accelerated hiking by DM central banks and exchange rate volatility adds upside risk to 2023 inflation. This may even result in a bigger move of 100bp if risks materialize.
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  • Commerzbank write that the vote split underlines that the majority of the council members take a hawkish stance and demonstrated the SARB’s determination in its fight against excessive inflation. They conclude that in view of domestic risks, the rand is likely to have difficulties to stand its ground and may come under depreciation pressure in case of risk-off.
  • Nedbank write that their projections show that inflation will remain above the target for the rest of 2022, averaging 6.8% by the end of the year. Given this outlook, they expect the SARB to hike by 50 bps and 25 bps at its September and November meetings. However, the likelihood of a more aggressive interest rate path remains high.
  • Goldman Sachs forecast a further 100bp of rate hikes by year-end to a terminal 6.50% policy rate (in our baseline delivered in two 50bp increments). Given the hawkish surprise to the July CPI print and the inflation expectations readings, we see risks tilted toward larger and more front-loaded tightening. In their view, the hawkish dissent at the July MPC meeting (1 member supporting a 100bp hike) likely comes as a significant hawkish surprise to market expectations.
  • JPM view a further 75bp move in September as likely (previously 50bp) and see the policy rate peak reached already in 1Q23 (previously mid-23) at an unchanged 7.25%. While not explicitly referenced, they sensed that Governor Kganyago was eager for the SARB not to be seen as behind the curve, forced to later play catch-up. Accelerated hiking by DM central banks and exchange rate volatility adds upside risk to 2023 inflation. This may even result in a bigger move of 100bp if risks materialize.