Friday , October 30 2020

Rand is pushing past R14.50 / $ as the Bank of Protection shows future cuts

The Rand was weakening past the important psychological level R14.50 / $ on Thursday afternoon, falling slightly after the Reserve Bank indicated that it could cut interest rates by the end of the first quarter of 2020.

Lesetja Kganyago, governor of the Reserve, said on Thursday that while the risks to SA growth remain at a disadvantage, the Bank's implied policy pathway identified the cut. At the March meeting, the Bank had noted that by the end of 2019 there had been an increase of 25 basic points on the cards.

The rand pushed to R14.5187 / $ following Kganyago's comments, but by 3.30pm it was 0.83% weaker on R14.4951 / $. The currency was 0.5% weaker on R16.1101 / € and 0.56% down on R18.3039 / £.

Three members chose to keep the repo rate unchanged at 6.75%, Kganyago said on Thursday, and two asked for a 25 point basic cut for May.

“The randomization has benefited from improved feelings towards more dangerous assets, but they will continue to be affected by idiosyncratic factors, such as domestic growth forecasts and policy installations,” said Kganyago.

Slow AM economic growth and relatively inclusive inflation have raised hopes of an economic boost through a loose financial policy, with data on Wednesday showing that consumer inflation has accelerated 4.4% in April, less than the expected 4.5% from economists.

However, on Thursday Kganyago said that the Bank's inflationary stance was looking forward.

Global monetary policy remains appropriate, and there is likely to be a lower risk to SA's forecast inflation if SA does not receive an interest rate cut in the coming months, says chief economist t FNB Mamello Matikinca-Ngwenya.

“We remain concerned about the continued weak domestic growth forecasts and are of the view that the expected underperformance in GDP in the first quarter will require a marked rebound in the next quarters for growth to be stronger than The growth recorded last year, ”Matikinca -Ngwenya said.

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