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The SA Daily 13 September 2019

Repo seems set for hold

Shireen Darmalingam

  • Statistics South Africa will release August CPI next week. Bloomberg consensus is for a slight rise in consumer prices to 4.3% y/y, from 4.0% y/y in July. We forecast 4.2% y/y. We expect CPI to average 4.2% this year; the SARB expects it to average 4.4% in 2019.
  • We expect food to have driven August CPI as food prices rose further in that month, after the 3.0% y/y July increase. Fuel prices too rose in August; petrol prices increased by 11c/litre, but diesel prices went down 13-14c/litre. This was followed by an 11c/litre increase in the petrol price in September, and a 26c/litre increase in the diesel price.
  • The SARB next week will have the August CPI outcome at its disposal before its rates decision on Thursday. We expect the repo rate to be kept at 6.5%. However, the money market is pricing in a cut.
  • While weak growth and subdued inflation pave the way to a rate cut, the SARB may opt to retain the repo at 6.5% due to the myriad rand-negative risks such as SA’s dire fiscal situation in combination with the global trade war and global growth slowing down.

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