Herewith the latest edition of our Interest Rate Barometer. We trust that this will contribute to a broad overview of our view and expected outcome of this week’s Monetary Policy Committee meeting. Please feel free to address any questions or feedback to the undersigned.

Executive Summary

  • The interest rate barometer considers the factors influencing the decision of the SARB’s Monetary Policy Committee as stated in the statement accompanying the previous meeting’s interest rate decision (21 July 2016) as well as developments since the previous meeting which could influence Thursday’s MPC rate decision. The factors are rated on a stand-alone basis as a likely hike, hold or cut and are weighted into 3 broad categories: global economy (20 %), domestic economy (40 %) and major inflation drivers (40 %) – as per Table 1.
  • Of the 13 factors analysed, two support expectations for a hike, nine factors support an unchanged stance and two factors favour a cut. On a weighted basis, this implies a 70 % probability of a hold at this week’s meeting.
  • Based on our analysis, the Nedbank CIB view is for the repo rate to be left unchanged this week. We are expecting the SARB to revise their CPI profile lower, taking into account the recent rand strength. The SARB is likely to reiterate that this is a pause in a hiking cycle in our view.

The rand and the local socio-political risk premium remain key swing factors given their fluidity. Key event-risk in the form of a possible credit rating downgrade in December, combined with a Fed rate hike possibility will also have a bearing on local monetary policy decisions. Currently, global capital flows are proving supportive despite the bearish macro-fundamental backdrop.