Key points

  • Easing local inflation and the maturity of the global monetary policy tightening cycle support the case for the SARB to keep rates on hold through the remainder of the year following its pause in July. The SARB has tightened policy aggressively this cycle, and now it needs to let that filter through completely into the economy to bring inflation back to target levels on a sustainable basis.
  • The recent ZAR volatility will be a concern for the SARB and, if sustained, can cause a shift in inflation expectations. However, for now, the market seems to be looking past it, with FRAs pricing in a flat rate trajectory over the medium term and breakeven rates falling back down to February lows.



Although the ZAR has had a volatile few weeks recently and is trading back above 18.5000/$, the SARB will likely look past this temporary depreciation and focus on easing inflation expectations. We believe that the MPC will remain cautious in its approach, keeping policy steady but holding the door open to future rate hikes to ensure it anchors inflation and inflation expectations.  Concerning the timing of the first cuts, much depends on the performance of the ZAR going forward. If further blowouts are avoided, the SARB may commence an easing cycle in Q2 of 2024.