Rand trades weaker post SARB interest rate hike
The rand has softened following the SARB rate hike, although movements may be guided by stronger US data.
Local lending rates rise
The South African Reserve Bank (SARB) has raised the repurchase rate (repo) by 0.25% from 3.75% to 4%. This takes the prime lending rate in South Africa to 7.5% from 7.25% previously.
Inflation a domestic and international concern
The SARB’s forecast for headline inflation in 2022 has been revised higher to 4.9% from 4.3% previously. Headline inflation is expected to be 4.5% in 2023 and in 2024. Core inflation is expected to rise to 3.8% in 2022, 4.4% in 2023 and 4.5% 2024.
Higher electricity and oil prices have and are expected to remain major contributors to the inflation figure. Higher domestic import tariffs, stronger services inflation, and higher wage demands suggest further upside risks to the inflation forecast.
GDP growth to decelerate
GDP (Gross Domestic Product) growth at 1.7% in 2022. The slower growth rate forecast in 2022 relative to that of 2021, takes into consideration a slowing rebound from the pandemic as well as a cooling of high export prices. GDP growth is forecast by the SARB to be at 1.8% in 2023 and 2.0% in 2024.
The rand
The rand weakened against the dollar post the Monetary Policy Committee (MPC) meeting and interest rate announcement. Weakness in the ZAR has however accelerated following better than expected US GDP data. The short-term movements in the USD/ZAR appear to be more guided by US data than the domestic data as we have seen the greenback strengthening against a broad basket of currencies.
Short term gains in the USD/ZAR suggest 15.45 as a near term resistance target.
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