The move of the South African Central Bank to cut its benchmark lending rate to a two-year low may be the last loosening of monetary policy for a while. How is South African’s economy impacted? Read on!
29 March, Swissquote – The USD is in a bear market. Japan’s yen has defied fates by not caving into interest rate differentials, which would have sent USD/JPY significantly higher than its current 106. Still, political scandal, lingering risk aversion and the expected removal of Abenomics has traders forecasting a stronger yen.
ECB Relaxed About Inflation
Meanwhile, German price-index figures released today suggest the European Central Bank might be too relaxed about inflation. Expectations were that inflation would remain around 1.5% through 2018, but it looks as if the rate might be accelerating.
If so, the ECB is likely to end its loose monetary policy by September, which would spike the EUR/USD. In the home of the USD, worries about the collapse of the North American Free Trade Agreement are declining. Mexico’s peso is the clear winner in Q1, benefitting from higher oil prices.
South African Central Bank Cuts Interest Rate – Rate At 6.50%
South Africa’s central bank confirmed its dovish policy on Wednesday, lowering its interest rate on repos by 25 basis points to 6.50%, its lowest since January 2016.
February’s consumer price index shows that inflation is under control at 4% annualised (January: 4.40%) and is expected to slow in March, as the rand has strengthened since the middle of November 2017 (USD/ZAR: -18.28%). The resignation of President Jacob Zuma (and the step-down of Zimbabwe’s President Robert Mugabe’s) have boosted the ZAR, thus reducing the cost of imports in the country.
South Africa’s economy shows signs of improvement
With treasuries gradually nearing investment-grade rankings from all three major rating agencies, South Africa’s economy showing clear signs of improvement. With improved manufacturing and increasing exports in March, we expect GDP growth to head towards the 1.80% range (February: 1.50%). USD/ZAR is trading at 11.82, bouncing back from an 11.62 low earlier this week and continuing its short-term rise toward 11.83.
This article South African Central Bank Cuts Interest Rate was written by Peter Rosenstreich & Vincent Mivelaz, analysts at Swissquote. While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein.
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