SARB likely to hike rates by 25bp

The central bank of South Africa increased its benchmark repo rate to 6.25% at its last meeting in November. The central bank revised down it near-term inflation forecast, and expects the headline inflation at 4.6% against 4.7% in previous estimate for 2015.

"The anticipated breach of the upper end of the target range in the first quarter of 2016 is now expected to average 6.4% (6.7% at the previous meeting) as well as lowering the trajectory for the remainder of 2016. However, given the weakening of the ZAR over the past month, inflation projections may be revised up at the next meeting and we expect the SARB to remain on the cautious side and hike rates further by 25bp to curtail higher inflation expectations", states Danske Bank.