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Hawkish SARB Hikes by 0.25%, Raises Forecast for GDP and Inflation

Hawkish SARB Hikes by 0.25%, Raises Forecast for GDP and Inflation

Richard Snow, Analyst

Something to note: 3 members of the MPC voted in favor of the 25 bps hike while 2 preferred a 50 bps hike. With only 5 decision makers we very easily could have been reporting a 50 bps hike today.

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Headline inflation is anticipated to breach the Bank’s 3-6% target band in Q2 2022 at 6.2% before dropping back in line in Q3 at 5.7%. It appears the bank is looking to get a handle on inflation and avoid the numbers witnessed in the US (7.9%) and UK (6.2%) – anticipated to rise higher.

Stronger revised growth in 2021 and higher commodity export prices this year has led the SARB to revise its GDP forecast upwards, from 1.7% to 2%.

Furthermore, 1.9% GDP growth is anticipated for 2023 and 2024 respectively.

Iron ore, platinum and gold prices – while lower towards the end of last year have helped strengthen the currency this year.

Inflation forecast to average 5.8% in 2022, up from 4.9% forecasted in the January meeting; and 3.0% in 2023

Current trade surplus to increase to 3% of GDP in 2022.

USD/ZAR drops after the announcement.

USD/ZAR 5-Minute Chart

Source: TradingView, prepared by Richard Snow

The daily chart highlights the ZAR strength in the leadup to the announcement, buoyed by higher commodity prices.

USD/ZAR Daily Chart

Source: TradingView, prepared by Richard Snow

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--- Written by Richard Snow for

Contact and follow Richard on Twitter: @RichardSnowFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.