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 (24 January 2017) as well as developments since the previous meeting (which, in our view, could influence the MPC rate decision on 30 March 2017). The factors are rated on a stand-alone basis as a likely hike, hold, or cut and are weighted into three broad categories: global economy (20%), domestic economy (40%) and major inflation drivers (40%) – as per Table  one.
  • Of the 13 factors analysed, two support expectations for a cut, ten factors support an unchanged stance, and one factor favours a hike. On a weighted basis, this implies a 73% probability of a hold at next week’s MPC meeting.
  • Based on our analysis, the Nedbank CIB view is for the repo rate to be left unchanged next week. We are expecting the SARB to revise their CPI profile lower, taking into account possibly lower food inflation and a stronger rand this year. We believe that the SARB is likely to reiterate that we are at the peak of the current hiking cycle.
  • We believe that the rand and the local socio-political risk premium remain key swing factors, given their fluidity. Key event-risks in the form of geopolitical tensions, combined with a Fed rate hike profile, will also have a bearing on local monetary policy decisions in our opinion.