MPC to hike by 25bp next week in South Africa

The inflation outlook will likely remain uncomfortable for the SARB as a multiquarter upside target breach looks likely from Q4, despite the recent respite in international oil prices. 

While the NERSA decision to decline Eskom's tariff application for this year mean has helped in the near term, this has only raised the risk that the target breach could last beyond Q2 next year if Eskom gets a steep tariff increase in July 2016.

The factors like upside risks to the inflation outlook.provide for a challenging backdrop for next week's meeting, particularly as inflation expectations have climbed higher. 

"On balance, the SARB is likely to hike by 25bp but soft activity data recently could potentially see the SARB sit tight for one more meeting, although the risks of this have abated somewhat with the Fed's less dovish stance recently, progress on Greece, and lower concerns about the impact of Chinese stock market volatility", says Barclays.