Although the SA Reserve Bank decided to keep interest rates on hold at their May 2019 MPC meeting, the statement was decidedly more dovish than their March statement. The logical conclusion is that the SARB is likely to cut interest rates by 25 basis points at their July MPC meeting – barring any major rand weakness in the intervening period.
The Bank’s inflation forecasts fell by 20-30 basis points over each of the next three years. This was despite higher oil price forecasts. Therefore the decline is being driven by a combination of lower food prices and lower underlying inflation in South Africa.
Their growth forecasts were unchanged, but they acknowledge downside risks given the expected contraction in first quarter GDP data, which will be published in early June.