Publications
Partners
Johannesburg - The SA Reserve Bank (Sarb) is expected to hold the repo rate unchanged on Thursday, in the view of Nedbank's Corporate and Investment Banking unit.
The unit expects the Sarb to revise its growth and CPI profiles lower.
"The Sarb is likely to reiterate that this is a pause in a hiking cycle," the unit said in a statement on Monday afternoon.
"The rand and the local socio-political risk premium remain key swing factors given their fluidity. Currently, global capital flows are proving supportive despite the bearish macro-fundamental backdrop."
The unit analysed 13 factors to determine its interest rate barometer. These include the factors influencing the decision of the Sarb’s Monetary Policy Committee (MPC) as stated in the statement accompanying the previous meeting’s interest rate decision in May 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%).
Of the 13 factors analysed, 2 support expectations for a hike (3 previous), 9 factors support an unchanged stance (8 previous) and 2 factors favour a cut (2 previous). On a weighted basis, this implies a 70% probability of a hold at this week’s meeting.
The shift indicates a short term reprieve, but maintains a hawkish bias over the longer term, according to the Nebank CIB unit.
