South African Reserve Bank was expected to be unchanged despite an improvement in headline inflation. Everyone expects this headline inflation theme to wane very quickly and this is the reason for a hawkish bias at the MPC. There is also a sense that ZAR is undervalued, which will trigger higher inflation. This would be particularly the case if bottlenecks in the energy sectors are not resolved. “Our seasonality-based inflation model shows headline rising from 4.5% now to 5.5% y/y in December”,says RBC Capital Markets.
The material has been provided by InstaForex Company – www.instaforex.com