Ayman M Al-Sayari: Statement - International Monetary and Financial Committee

What the desk is arguing

The desk argues that the Saudi Central Bank's current stance, as articulated by Governor Al-Sayari, indicates a proactive approach to safeguarding the economy against external shocks. This is particularly relevant as global inflation remains a pressing concern, and the Kingdom's monetary policy is closely tied to U.S. interest rates. Per the full note source, Al-Sayari highlighted the need for vigilance in monitoring inflation trends, which supports our view of a stable SAR/USD.

Supporting this view, the Saudi Central Bank's recent actions, including maintaining interest rates at 5.25%, reflect a commitment to stability in the face of rising global inflation. This aligns with our expectation that the SAR will remain within a defined range against the USD, particularly as the Fed's next moves are anticipated to be data-dependent.

The alternative read would be that if inflationary pressures were to ease significantly, the Saudi Central Bank might consider a more aggressive easing stance, which could weaken the SAR against the USD. However, current indicators suggest a cautious approach is more likely.

Where it sits in our coverage

Our consensus target for SAR/USD is 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.08 (Mar26)

This view aligns with jpmorgan's target, which sits at the upper bound of our range, while bofa presents a more cautious outlook at the lower end. The desk's call reflects a balanced perspective amid diverging views across firms.

How other firms see it

Firms such as jpmorgan and citi are aligned with our outlook, emphasizing stability in the SAR/USD pair, while bofa holds a contrary position, anticipating a weaker SAR. This divergence highlights the uncertainty surrounding inflation dynamics and their impact on monetary policy.

Watch the USD/JPY trajectory for potential spillover effects, particularly as the Bank of Japan's policy decisions could influence broader market sentiment and risk appetite.

What the calendar says

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