Key points:

  • The local inflation picture and maturity of the global monetary policy cycle suggest that the SARB has room to keep rates on hold once again at its September MPC meeting. Financial markets are no longer pricing in a definite rate hike from the Fed through the remainder of the year, while this week’s ECB meeting suggested that the Eurozone could be spared from further rate hikes as the economy struggles.
  • Therefore, the SARB may have done enough to ensure that rates remain high enough to attract capital while supporting the ZAR despite the obvious fiscal risks the country faces. That being said, risks to the inflation outlook persist, and the Fed remains hawkish in its communication. Therefore, even if the SARB keeps rates on hold again this month, it will signal that rates could rise further and that any cuts are still a long way out.



The SARB’s recent guidance that it could still hike rates further is prudent and indicates that it will not hesitate to respond if the conditions warrant it. Following the recent soft inflation reading and shift in global monetary policy expectations, the call for the next meeting remains a hold. However, the ZAR remains the swing factor, and further depreciation from current levels could tilt the scales in favour of one last 25bp increase to prevent a reduction in inflation expectations.