Rand runs out of steam after SARB’s decision

THE RAND rallyy fizzled after the central bank kept rates on hold yesterday, while stocks rose led by financial and retail shares on prospects of fewer bad debts for lenders and less pressure on consumers. By 5.30pm, the rand traded 0.5 percent weaker at R13.64 against thedollar from a session high of R13.3775, wiping out gains triggered by Wednesday’s decision by the US Federal Reserve to keep interest rates unchanged. “It could be that the flow, linked to specific deals recently, has been satiated, and you’re also seeing the beginning of speculation about rate cuts and that’s getting priced in,” said economist at ETM Analytics Michael Potgieter.

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THE SA Reserve Bank has indicated that an improved inflation outlook coupled with positive economic data could bring an end to rate hikes.

Governor Lesetja Kganyago said yesterday that the situation had allowed the bank to “pause for longer” – signalling the end of the tightening cycle.

Kganyago said the bank’s monetary policy committee (MPC) unanimously decided to keep lending rates unchanged at 7 percent a year in line with market expectations. “The MPC is of the view that should current forecasts transpire, we may be close to the end of the tightening cycle.”

The decision comes in the wake of the 3.3 percent quarter-on-quarter gross domestic product (GDP) growth reported in this year’s second quarter; the narrowing of the current account deficit to 3.1 percent; and the levelling of inflation below previous forecasts.

Inflation expectations have