South Africa: Strong rand will keep SARB on hold - TDS

Research Team at TDS, suggests that in line with the unanimous consensus, they expect the SARB to keep its policy rate on hold at 7.0% at Thursday’s (21 July) MPC meeting.

Key Quotes                               

“Since the May meeting the inflation outlook has improved, mainly as a result of the strong performance of the rand. Furthermore, May CPI data surprised to the downside.

Recent economic activity has generally surprised to the upside. It is possible that the SARB revises its forecast for 2016 growth slightly upwards from the current 0.6%. However, growth is likely to remain anaemic and the recovery slow.

Looking forward we think that we are very near the end of the tightening cycle and have pencilled in just 25bps more in hikes. However, the performance of the rand will be crucial in determining the future path of the SARB’s policy rate. With political risks high and the possibility of a downgrade to sub-investment grade by the year end, a continuation of the current strength of the rand cannot be taken for granted.”