Once in a blue moon, the SA Reserve Bank will take markets by surprise with a cut when one was not expected or with a bigger cut than economists anticipated. There were no shades of lunar blue when Governor Lesetja Kganyago announced the outcome of the Monetary Policy Committee’s three-day meeting, which takes place once every two months. A cool customer, he was as predictable as the moon’s phases.
The tone at different points seemed neutral: “The overall risks to the inflation outlook are assessed to be largely balanced.” Then came this kicker:However, the impact of upside risks to the inflation outlook could be significant. Global financial conditions can abruptly tighten due to small shifts in inflation outlooks in advanced economies and changing market sentiment.
On economic growth, the SARB slashed its 2019 forecast to 0.6%, down from an already sluggish 1% in May, in the wake of the shock 3.2% contraction in the first quarter. That dire number had prompted a slim hope among a handful of economists that the SARB might shave off 50 bp, but the MPC was having none of it. Asked at the press conference if the MPC had even discussed the prospects of a 50 bp cut, the governor responded with a stony-faced: “There was no discussion about 50 basis points.