SARB Rate Hike, USD/ZAR Analysis
SARB Hikes 75 Bps as Global Peers Increase Rate Hike Increments
The South African Reserve Bank (SARB) voted to hike local lending rates by 0.75%. The 75 basis point increase was deemed necessary in order to keep up with the accelerated rate hike increments in the developed world as well as to calm the current trajectory of inflation which has breached the 3%-6% target range.
Vote Split:
- 1 vote for 50 bps
- 3 votes for 75 bps
- 1 vote for 100 bps
Earlier this month the Bank of Canada shocked markets by raising rates by a full 1% or 100 bps which had a ripple effect on market expectations for a potential 1% hike by the Fed next Wednesday. Such impulsive expectations have settled since then, now anticipating a 75 bps hike.
Regarding price stability (inflation), SA CPI[4] has breached the 6% ceiling for two months in a row now and has resulted in the SARB revising its inflation forecast to 6.5% for 2022, up from 5.9% and 5.7% for 2023, up from 5%.
On the growth front, better than expected GDP[5] data for Q1 welcomed a positive revision in 2022 GDP to 2%, up from 1.7% but Q2 GDP is forecast to show a 1.1% contraction as a result of regular load shedding and the impact of the Kwazulu-Natal (KZN) floods.
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