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Paul Fage, senior emerging markets strategist at TD Securities, points out that in line with their forecast and the unanimous consensus, the SARB kept its policy rate on hold at 6.75% at yesterday’s MPC meeting.

Key Quotes

“The SARB has, yet again, moved its CPI forecasts lower. The SARB also lowered its growth forecast for 2019 to 1.0%, although it kept its forecasts for 2020 and 2021 unchanged.”

“The fact that 2 out the 5 current members voted for a 25bps cut shows that the policy stance is clearly moving in a more dovish direction driven by the improved inflation outlook.”

“We now expect the SARB to cut the policy rate by 25bps at the July meeting, with some possibility of another cut later this year. Next year we expect rates to be kept on hold. Of course, while this is not our central scenario, there is obviously a risk that a sharp rand sell-off could put any idea of cuts on ice.”