Post a lower-than-expected CPI print on Wednesday, the Monetary Policy Committee (MPC) opted to keep rates unchanged at 8.25% at Thursday’s meeting. The SA Reserve Bank (SARB) lowered its CPI forecast for the second half of 2023 from 5.7% on average to 5.4%, and from 5.4% to 5.1% in the first half of 2024.

Since November 2021, the policy rate has been raised by 475 basis points (bps), with the SARB hiking at each of the past ten meetings. It is prudent at this point to take a break from hiking to assess the cumulative effects on inflation. According to the SARB’s projections, if rates remain on hold, the real repo rate will rise to 3.25% by mid-2024, which would be extremely restrictive from a growth perspective. Consequently, we think this will be the end of the hiking cycle. We expect that while global financial conditions remain tight, SA may be forced to keep real rates near these levels; but as the global recession brings developed market rates lower, the SARB can consider rate cuts.