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The conclusion of the South African Reserve Bank’s (SARB) monetary policy meeting saw rates left unchanged, which was in line with consensus estimates, as inflation moderates (with rand strength) and the outlook for economic growth improves.
August’s Consumer Price Index data (CPI), year on year, showed inflation to have retreated back within the reserve bank’s 3% to 6% targeted band at 5.9%. Domestic inflation is now expected to peak at 6.7% in the fourth quarter revised lower from the previous SARB estimate at 7.1%.
After a much improved second quarter Gross Domestic Product data (GDP) print, the reserve Bank now expects economic growth for 2016 at 0.4% (previous guidance 0%).
The rand found renewed weakness transpire after the central bank suggested that if the current economic conditions improve as predicted that we may be nearing the end of the monetary tightening cycle.
The below USD/ZAR hourly chart from the Monetary Policy Committee (MPC) meeting shows the weakness which has ensued in our domestic currency post the meeting in lieu of the possible ending of the monetary tightening cycle.