Measured rate cut in Turkey and surprising move in South Africa – Rabobank

Rabobank analysts point out that the South Africa Reserve Bank was widely expected to refrain from lowering interest rates on Thursday despite subdued inflationary pressure and bleak outlook for already weak economy.

Key Quotes

“The main constraint for the SARB to ease monetary policy has been the risk that domestic shocks would put pressure on the rand and inflation.”

“Yet, the SARB defied our and market expectations and trimmed the policy rate by 25bps to 6.25%. When Governor Kganyago announced the decision during a press conference, reporters were so stunned (at least initially) that only one question was asked in the first round. Looking at the astonished faces in the room Kganyago even joked “well, this concludes today’s press conference” after answering a single question.”

“Paradoxically, it was the central bank of Turkey that surprised the market in a positive way. The 75bps cut was spot on the consensus expectation, although the range of forecasts was very wide and almost 30% of analysts surveyed by Bloomberg had not expected a cut.”