South African Rand: SARB hike and hawkish tone – Commerzbank
Commerzbank’s Volkmar Baur expects the South African Reserve Bank (SARB) to deliver a 25 basis point rate hike after surprising markets by holding rates in July.
Commerzbank's Volkmar Baur anticipates the South African Reserve Bank (SARB) to increase interest rates by 25 basis points following its unexpected decision to keep rates steady in July. Baur contends that the SARB should not only raise rates but also adopt a hawkish stance due to persisting inflation, cooling growth, and elevated risks related to fuel and food prices.
These concerns have led the market to fully price in the impending rate hike. While the circumstances differ from July, when the SARB left the key interest rate unchanged, the outcome is expected to be different as well. The Iran conflict has persisted, oil prices have not decreased, and growth has cooled more than anticipated. Consequently, the SARB is in a more challenging position this week.
With growth slowing and inflation pressures remaining, Baur argues that the SARB should not only hike rates but also signal a hawkish tone, as a softer stance could further weaken the Rand.
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