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Rand continues to weaken after SARB rates meeting

The South African Reserve Bank (SARB) has kept lending rates unchanged at the conclusion of its Monetary Policy Committee (MPC) meeting.

Rand weakens further after SARB MPC meeting

The South African Reserve Bank (SARB) has kept lending rates unchanged at the conclusion of its Monetary Policy Committee (MPC) meeting. The decision was in line with consensus estimates and leaves the repo rate at 3.5% and the prime lending rate at 7%.

The central bank’s Quarterly Projection Model (QPM) has however suggested that rates could increase by 25 basis points (0.25%) in both the second and fourth quarters.

The lower inflation realized has in part been an influence in the SARB guiding that a rate hike previously expected in the third quarter could now be moved to the fourth quarter. This is perhaps reason for a further weakening of the ZAR over the meeting.

In terms of forecasts the SARB has guided the following:

  • Headline CPI (Consumer Price Index) expected at 4.3% in 2021, 4.4% in 2022 and 4.5% in 2023
  • Core CPI expected at 3.3% in 2021, 4% in 2022 and 4.3% in 2023
  • GDP (Gross Domestic Product) growth of 3.8% expected in 2021, 2.4% in 2022 and 2.5% in 2023

The USD/ZAR

The USD/ZAR has now broken above the 14.90 level as global risk aversion and a slightly more dovish SARB weighs on the domestic currency.

The move above 14.90 is accompanied by the stochastic crossing out of oversold territory, supporting the move. 15.20 becomes the initial target from the move. Traders who are long might consider trailing a stoploss on a close below the previous day’s low.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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