Rand firms as rates unchanged
THE rand was firmer yesterday afternoon, after the Reserve Bank kept interest rates unchanged at its first meeting of 2018.
But despite the rand appreciating 13.1% against the dollar since the last meeting of the monetary policy committee (MPC) in November, Reserve Bank governor Lesetja Kganyago warned of possible renewed rand weakness.
“In the near term, the rand is expected to remain sensitive to sentiment generated by political developments,” he said. These included the lingering prospect of a creditratings downgrade to subinvestment grade by Moody’s.
A Bloomberg consensus of 19 economists and analysts showed that 13 expected rates to be unchanged, while five forecast a cut of 25 basis points, with one predicting a 50 basis-points drop.
The rand showed little movement during most of Kganyago’s address, having been at R12.27/$ when he began. It strengthened, however, towards the end, to R12.19/$, before falling back to R12.23/$ by the time he stopped speaking.
Kganyago was positive about inflation remaining subdued over the medium to long term.
The average forecast for 2017 is unchanged at 5.3% but has been revised downwards for 2018 and 2019 to 4.9% and 5.4% respectively, from 5.2% and 5.5% previously. Inflation is expected to average 5.5% in the final quarter of 2019.
The lower turning point of the forecast is still expected in the first quarter of 2018 but has been revised down from 4.7% to 4.4%.
Property stocks were the biggest losers‚ with investors in the sector describing the Bank’s decision as disappointing.
“With the improvements in the currency and stability of the consumer inflation rate within the Reserve Bank’s own target range‚ the time is right for a rate cut to stimulate the economy and property market‚” said Seeff Property group head Samuel Seeff.
The Bank maintained its forecast of three rate increases of 25 basis points by the end of 2019‚ as indicated previously‚ but now described the third increase as “a marginal call”. Furthermore‚ the timing of the first increase had been pushed out to later in the period‚ Kganyago said. —