SARB keeps rates steady, cuts GDP outlook, unlikely to hike anytime soon

The South African Central Bank (SARB) kept interest rates steady and cut their economic growth outlook all the way to 2021.  The unanimous decision to keep rates steady at 6.75% was widely expected.  The MPC noted that they continue to asses the stance of monetary policy to be accomodative.

The MPC maintained their inflation forecasts for 2019 at 4.8% and 2020 at 5.3% and trimming 2021 from 4.8% to 4.7%, which are all within the Bank’s 3.0-6.0% target range.

The monetary policy statement noted, “Since the January MPC, the rand has depreciated by 6.4% against the US dollar, by 5.2% against the euro, and by 6.1% on a trade-weighted basis. The implied starting point for the rand is R14.00 against the US dollar, compared with R14.30 at the time of the previous meeting. At these levels, the QPM assesses the rand to be less undervalued.”

While the SARB’s Quarterly Projection Model still sees the chance of a 25 basis hike before the end of the year, it will be difficult them to hike with risks to the growth forecast continuing to be on the downside.

Following the decision and press conference, the rand was lower to the dollar by 0.3%, mainly having some contagion pressures stem from Turkey.  The SARB keeps the door open for a hike later this year and we could see the rand rally once we see the dust settle in Turkey and if we see global growth concerns ease in the coming months.

 

 

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya