Decision due: Wednesday 23 September, usually 15:00 SAST · Current repo rate: 7.0%
1. Executive summary
The South African Reserve Bank is expected to raise the repo rate by 25 basis points to 7.25% at this meeting. The single most important driver is the need to prevent inflation from stabilising above the new 3% target, as repeatedly emphasised by the Governor in his August communications and consistent with the 4-2 split at the July decision where two members already favoured tightening as recorded in the statement tally, despite USD/ZAR falling 3.6%. The key risk is that the August inflation data released before the announcement prints materially softer than expected, or that the new QPM projections revise the policy-rate path lower, which would support a hold instead.
2. The call
Surveyed economist consensus is for a rise to 7.25%. We agree with that call and expect the MPC to deliver a 25bp hike at this meeting, taking the repo rate to 7.25%. This would follow the July hold (4-2, with two members preferring an immediate increase) and keep the tightening cycle intact after the May hike as recorded in the statement tally, despite USD/ZAR falling 3.6%. The case rests on the Governor’s explicit focus on re-anchoring expectations at the new 3% target and the fact that both headline and core CPI remain above the upper edge of the tolerance band. A hold would require a much softer August CPI print or a dovish shift in the QPM path; either would alter the call.
3. The committee
Lean labels summarise RoboMacro's read of each member's public communications over the past six months, from Hawkish to Dovish. A lean is assigned where recent remarks carry a monetary-policy stance, or where a recorded vote is a dissent, hike or cut: 1 of 6 members currently qualify (Kganyago).
| Member | Role | Lean |
|---|---|---|
| Lesetja Kganyago | Governor | Leans hawkish |
| Rashad Cassim | Deputy Governor | No policy signal |
| Mampho Modise | Deputy Governor | No regular speeches |
| Nomfundo Tshazibana | Deputy Governor and CEO of the Prudential Authority | No policy signal |
| David Fowkes | Adviser to the Governors | No regular speeches |
| Konstantin Makrelov | Chief Economist | No regular speeches |
Kganyago remains the pivotal voice, with his August remarks underscoring the May hike and the risk that the EIA WTI spot shock lifts longer-term expectations. The committee’s recent voting record shows persistent 4-2 splits: unanimous in March, 4-2 to hold in January with two members preferring a cut, 4-2 for the May hike, and 4-2 to hold in July with two members again preferring an increase as recorded in the statement tally. That pattern, combined with the Governor’s public emphasis on delivering the 3% target, points to a narrow majority for tightening at this projection round. The other five members produce few attributable policy signals, leaving the Governor’s lean and the unattributed vote counts as the main guide to the balance.
4. Data since the last decision
| Indicator | Latest | Consensus | Surprise | Prior | Δ |
|---|---|---|---|---|---|
| Headline CPI (YoY) | 4.3% (Jul, rel. 19 Aug) | 4.5% | -0.2pp | 5.0% (Jun) | -0.7pp |
| Core CPI (YoY) | 4.2% (Jul, rel. 19 Aug) | — | — | 4.1% (Jun) | +0.1pp |
| BER inflation expectations | 4.0% (Q3, rel. 16 Sep) | — | — | 4.2% (Q2, revised) | -0.2pp |
| PPI (YoY) | 5.7% (Jul, rel. 27 Aug) | 6.1% | -0.4pp | 7.5% (Jun) | -1.8pp |
| Real GDP growth (QoQ) | -0.2% (Q2, rel. 08 Sep) | -0.1% | -0.1pp | 0.4% (Q1, revised) | -0.6pp |
| Real GDP growth (YoY) | 0.9% (Q2, rel. 08 Sep) | 1.2% | -0.3pp | 1.9% (Q1) | -1.0pp |
| Unemployment rate | 33.6% (Q2, rel. 11 Aug) | — | — | 32.7% (Q1) | +0.9pp |
| Absa Manufacturing PMI | 45.8 (Aug, rel. 01 Sep) | — | — | 46.8 (Jul) | -1.0pt |
| S&P Global South Africa PMI | 50.5 (Aug, rel. 03 Sep) | — | — | 50.3 (Jul) | +0.2pt |
| Manufacturing production (YoY) | 1.1% (Jul, rel. 10 Sep) | -1.6% | +2.7pp | -1.8% (Jun, revised) | +2.9pp |
| Mining production (YoY) | -7.5% (Jul, rel. 10 Sep) | -2.8% | -4.7pp | -4.3% (Jun, revised) | -3.2pp |
| Retail sales (YoY) | 3.4% (Jul, rel. 16 Sep) | 0.9% | +2.5pp | 1.1% (Jun, revised) | +2.3pp |
| Private-sector credit (YoY) | 7.4% (Jul, rel. 31 Aug) | — | — | 7.8% (Jun, revised) | -0.4pp |
| M3 money supply (YoY) | 8.6% (Jul, rel. 31 Aug) | — | — | 9.3% (Jun) | -0.7pp |
| SACCI business confidence | 123.5 (Jun, rel. 18 Aug) | — | — | 124.1 (May) | -0.6pt |
| Trade balance | 20.1bn ZAR (Jul, rel. 31 Aug) | — | — | 17.2bn ZAR (Jun, revised) | +2.9bn |
| Current account balance | -205.5bn ZAR (Q2, rel. 10 Sep) | — | — | 181.6bn ZAR (Q1, revised) | -387.1bn |
| USD/ZAR (daily close) | 16.17 (23 Sep) | — | — | 16.77 (23 Jul) | -3.6% |
| WTI crude (EIA WTI spot, USD/bbl) | 89.84 (22 Sep) | — | — | 93.08 (23 Jul) | -3.5% |
| 5Y government yield | 8.62% (21 Sep) | — | — | 8.75% (23 Jul) | -13bp |
| 10Y government yield | 8.87% (21 Sep) | — | — | 9.02% (23 Jul) | -15bp |
Market rows are measured from the 23 Jul close — the last observation common to every market series on or before the last decision. Priors marked "revised" are the source's current vintage for that period, which differs from the figure as first published. WTI crude (EIA WTI spot, USD/bbl) inter-meeting high 107.02 on 15 Sep (+15.0% from the decision close). WTI crude (EIA WTI spot, USD/bbl) latest after that official print is the CME daily close (CL=F via Yahoo), not a later EIA spot. Last EIA Cushing WTI spot on FRED is 107.02 on 15 Sep.
The data flow since the July decision has been mixed but tilts towards a tighter stance. Headline CPI fell sharply to 4.3% in July, surprising 0.2pp below consensus, while PPI dropped even faster. Core CPI, however, edged higher to 4.2%. BER inflation expectations eased to 4.0% in the third quarter but remain above the new 3% target. Real GDP contracted 0.2% in the second quarter, weaker than expected. Unemployment rose to 33.6%. The Absa manufacturing PMI stayed in contraction territory. Offsetting strength appeared in retail sales and manufacturing output, both beating expectations, while the rand strengthened 3.6% and government yields fell. The current-account balance swung into deficit.
These prints point to an outlook in which inflation is declining from the EIA WTI spot-driven peak but is not yet securely on a path back inside the 2-4% band over the next two to three quarters. Core momentum remains a concern, and the July statement had already flagged rising longer-term expectations after the second-quarter BER survey. Activity is clearly below trend, the output gap is widening, and the labour market is loosening, yet the MPC’s mandate hierarchy places inflation first. The inflation level and its trajectory are doing the decisive work in the call; the labour-market slack is a countervailing force but not yet dominant.
5. What the speeches say
Committee-member speeches published since the last decision. Dates are publication dates.
“Our judgement in raising rates at that May meeting was that we needed to act so that inflation could return to target over time, rather than getting stuck above 3%.”
“We recently received second-quarter data for our benchmark survey of inflation expectations, which showed respondents raising their inflation expectations significantly, even at the two- and five-year horizons.”
“our May decision should remove any lingering doubts that the SARB intends to achieve its target.”
6. Scenarios
| Scenario | Trigger | Rate path |
|---|---|---|
| Base case | August CPI consistent with July trend and QPM path little changed | Hike to 7.25% at this meeting, stable rates thereafter until clearer re-anchoring of expectations |
| Stronger inflation pressure | August CPI above consensus or BER expectations rebound | Hike to 7.25% and signal possible further tightening in November |
| Weaker activity and faster disinflation | August CPI soft, QPM path shifts cuts forward | Hold at 7.0% and dovish guidance on earlier easing |
7. Into the meeting
The August inflation prints land before the announcement and are the same-day data risk; any upside surprise would reinforce the case for an immediate hike. The statement will be watched for language around the new QPM forecast and its policy-rate path; a revision that keeps rates broadly stable through the remainder of the year before cuts would be seen as consistent with a one-off tightening, while any lift in the near-term path would be read as more hawkish. At the press conference the Governor’s answers on the latest BER expectations and the resilience of the rand will set the immediate market tone. In the weeks after the decision the September CPI due on 21 October and the October print in mid-November become the next focal points for whether the tightening delivers the required disinflation.
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