Compiled by: Richard Favis
RBC Capital Markets
+27 11 784 5065
All bets are off on the South African Reserve Bank lowering rates next week, following the publication of its latest Financial Stability Review this week.
The SARB stated that the domestic financial environment appears to be sound and no evidence could be found that suggests a threat to financial system stability. However, it was concerned that the rising oil price may have a negative effect on inflation and interest rates.
Local fuel prices have increased by 24% since January and further hikes are expected on the back of record crude oil prices and a marginally weaker rand.
Other economic data released this week included better than expected vehicle sales as well as improved business confidence indicators.
September new vehicle sales showed growth of 22.7%y/y compared to 18.8% y/y during August. Buoyant consumer demand, on the back of the stable rand, and recent interest rate relief boosted vehicle sales.
Business confidence registered another record level of 130.9 in September compared with 127.8 in August. Factors supporting the improved business mood included the relative strength of the rand, discipline in domestic inflation and the surge in consumer spending.
Next week manufacturing production data will be released but the focus of the market will be the all important rate decision on October 14.