Thursday, September 24, 2015

SARB: Rates on hold, outlook gloomy, ratings downgrade in the pipeline – TDS

FXStreet (Delhi) – Paul Fage, Senior Emerging Markets Strategist at TD Securities, notes that the SARB has kept its policy rate, the repo rate, on hold at 6.0% in yesterday’s policy meet and with downwards revised growth projections, it will be harder for the government to avoid ratings downgrades.

Key Quotes

“The press statement painted a rather gloomy picture of the South African economy. The SARB has revised down its forecasts for GDP growth in 2015, 2016 and 2017 all by 0.5ppt to 1.5%, 1.6% and 2.1% respectively.”

“The SARB has revised down its near-term forecasts for CPI inflation, which is seen peaking at 6.7% Y/Y in Q1 2016 compared to a previous forecast of 6.9%. However, its medium-term forecasts have been revised slightly higher. The SARB thinks the overall risks to the inflation outlook are to the upside.”

“The current level of the policy rate is seen as accommodative and the MPC remains on a gradual policy normalisation path. We think there is a good chance of a hike at the November meeting, particularly if the Fed adopts a more hawkish stance or even hikes rates in the interim, or if the rand weakens further.”
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