SARB expected to keep rates unchanged


“We are calling for absolutely no change in rates at this policy meeting. The Reserve Bank had been very clear about this that they see no benefit in being pre-emptive with a rate hike as long as inflationary pressures appear quite muted, and as long as the growth risks seem to lie on the downside,” Absa Capital economist Peter Worthington told CNBC Africa.

“However right now is a very interesting time for inflation. We have the CPI print for August, which is due out on Wednesday, and up until this point we have seen very little pass through from the large rand depreciation over the last 12 months into the level of consumer prices.”

The South African Reserve Bank is due to make a rates decision this Thursday and is also expected to keep the repurchase rate at four-year lows. The inflation rate and rand volatility are however still deciding factors on how the market will fare after the announcement.


Worthington added that while the last PPI prints may have been on the upside, he expects a slightly delayed pass-through to show up in CPI prints from now onwards.

The next CPI print for August is expected to be at 6.4 per cent from the previous month’s 6.3 per cent, but Worthington anticipates an increase to 6.6 per cent.

 “Although we’re calling this to be the peak, what we probably see in terms of the balance of risks is that we’re going to be surprised on the upside going forward,” he explained.

The Us Federal Open Market Committee (FOMC) will also be meeting this week to announce the final decision on tapering.

 “I think we’re going to see a week where markets generally are very volatile because the root of this issue is we’re at the end of a cycle, and markets are always volatile at the end of cycles. It is an unprecedented cycle,” said Worthington.

“We have never before seen either quantitative easing as we have over the past few years or the taper of it, so I think markets are going to prove very reactive to small nuances in either who’s going to be the Fed chairman or in the language of the FOMC or in the size of the taper.”