As expected, South Africa central bank kept rates unchanged at +6.75%.
- The decision to keep policy steady was unanimous.
- The MPC considers monetary policy to be moderately accommodative
- Overall risks to inflation remain tilted to the upside
- Economic challenges are structural, with access risks to be to the downside
- Policymakers cut its inflation forecasts, adding that inflation expectations have reduced since the previous monetary policy meeting
- SARB’s model shows implied rate path is for one +25 bps hike to +7.00% by end 2021 – prior the central bank model saw four-rate hikes of +25 bps by end 2020
- SARB does not automatically follow the Quarterly Projection Model (QPM), which is viewed as an ‘extra’ member of the MPC
USD/ZAR – The South African rand has fallen after the rate announcement. Prior to the release, many were expecting SARB to sound more ‘hawkish’ before the rate decision given the inflation increase in November. USD/ZAR has rallied to around $13.80, from $13.75 before the decision.
