34 TMI | THE SOUTHAFRICANTREASURER NEXT GENERATIONTREASURY Fig 1 -1.55%, which compares with a SARB neutral real rate estimation of 2.3-2.4% over the next few years. Inflation pressures will ease and the neutral rate estimation will be lowered as a result. However, this suggests that, for now, current rates are still well belowwhat the SARB would consider ‘growth neutral.’ While this highlights the fact that monetary conditions are still accommodative, given that inflation is likely peaking, the implied level of accommodation is exaggerated. Taking into consideration ETM’s proprietary models, our base case is for the Repo Rate to top out at 7.00% in the current tightening cycle. For the purpose of this study, we have included two other scenarios where rates peak at 6.25% (lower risk) and 12.00% (extreme upper risk), an event where the currency suffers sharp depreciation and SA slips into a stagflation crisis. Fig 2 Scenario 1 3,0 3,5 4,0 4,5 5,0 5,5 6,0 6,5 7,0 7,5 8,0 8,5 9,0 9,5 10,0 10,5 11,0 11,5 2018 2019 2020 2021 2022 2023 2024 Percentage (%) Source: ETM Analytics, SARB Repo outlook still implies accomodative policy Neutral policy rate Upper bound Lower bound Repo rate QPM projection Upper repo risk Lower repo risk Relatively tight policy Exceptionally loose policy Repo range given potential deviations of CPI CPI spike amid high oil prices and/or ZAR weakness Fig 3 Scenario 2
RkJQdWJsaXNoZXIy MjczOTI1