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The SA Daily 15 January 2019

Rates next on radar

Shireen Darmalingam

  • The SARB’s three-day Monetary Policy Committee (MPC) meeting starts today; the interest rate decision is therefore next on the radar. We expect rates to be kept on hold this year.
  • The money market has become less hawkish since the last MPC meeting in November, foreseeing no hikes in 2019 (see chart below).
  • We too expect the SARB to keep the repo rate unchanged in 2019. We see a relatively low exchange rate pass-through to prices, which would help keep inflation contained within the 3% - 6% target range this year. A low inflationary trajectory is likely to be further supported by low oil prices as well as low global inflation.
  • Furthermore, should oil prices and the rand remain at their current levels, there could be downside risks to the inflation outlook.
  • The SARB maintains that the exchange rate is a key risk to the inflation outlook; the rand is now at similar levels as at the time of the MPC meeting in November.
  • However, we see the rand recovering to R13.40/$ by year-end, supporting our view for interest rates remaining on hold this year.

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