South Africa: SARB cuts repo rate by 25bps, positive market reaction – TDS

The SARB cut the repo rate by 25bps to 3.50% today as expected by the consensus and economists at TD Securities forecast a final 25bps cut for September. USD/ZAR reacted reversing its early session losses and now trades at 16.54, up 0.38% on the day.

Key quotes

“The SARB cut the repo rate by 25bps to 3.50% today as expected by the consensus but less than our call for easing of 50bps. Indeed, the MPC cut its projections for growth lower and adjusted some of the inflation forecasts to the downside as we had expected. But the revisions weren't enough to trigger a bolder move by the MPC.”

“We now pencil in a final rate cut of 25bps to 3.25% for the September meeting, but stand ready to adjust this forecast as new data becomes available. In particular, we now realize that the stance of the MPC has visibly tilted to the hawkish side.” 

“The market reaction to the announcement was positive on account of stronger ZAR (that pared about half of today's decline) and lower bond yields (especially long dated). Stocks however have continued to decline through the session.”