SARB rates preview and ZAR trading view
In this article we preview the upcoming SARB MPC meeting and rates announcement and look at how the rand is trading ahead of the news.
SARB MPC meeting preview
When is the SARB rates Decision?
The South African Reserve Bank, concludes its monetary policy committee meeting on Thursday the 23rd of September 2021. The conclusion of the meeting will see Reserve Bank governor Lesetja Kganyago announce any changes to current lending rates, as well as revised forecasts for the local economy.
Will lending rates change at the meeting?
Consensus estimates overwhelmingly predict that lending rates in South Africa will remain at record lows with the repo rate at 3.5% and the prime lending rate at 7%.
Why is no change in rates expected?
The continued rise in unemployment to its highest levels on record (34.4% in Q2 2021), while inflation remains contained and economic growth meagre, present a challenging environment for the SARB. Increasing rates to soon can further stifle growth and impact employment, and the fact that inflation remains well within the central banks targeted band adds to the suggestion of delaying a rate hike till next year.
Forecast for inflation
Inflation is expected to remain subdued at around 4.3% in 2021.
Forecast for growth
Civil unrest in the third quarter is likely to impact third quarter Gross Domestic Product growth which is now forecast at around 4.2% for 2021.
The Rand
The domestic currency weakness over the last 9 days or so has stemmed more from factors external than from catalysts which are local. A risk off trade environment and dramatic fall in commodity prices have weighed on the ZAR. Wednesday’s US rate announcement and press conference is likely to be a key factor in short term movements for the domestic currency. More hawkish commentary from the Federal reserve is expected to weigh further on the rand, while dovish commentary is expected to see some short term relief manifest.
The USD/ZAR - Technical Analysis
The USD/ZAR has now broken above the 14.75 resistance level. The move higher now targets the next level of resistance considered at 15.00. Traders who are long might consider keeping a tight stop on a close below the Tuesday intraday low at 14.65.
In summary:
The SARB rates announcement and press briefing is scheduled for the 23rd of September 2021
No change in rates are expected
Inflation remains contained, while unemployment is high and economic growth remains lacklustre
Inflation is forecast at 4.3% in 2021
GDP growth of 4.2% is expected for 2021
The rand’s short term weakness is primarily a result of external rather than domestic factors at present
The USD/ZAR has broken above the 14.75 resistance level, which targets a move towards 15.00
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