Rates decision buoys JSE and rand
The JSE was in buoyant mood ahead of Friday’s public holiday, gaining for a third straight day as markets globally recovered from a sharp selloff at the start of the week. The rand was firmer, too, as markets welcomed the Reserve Bank’s decision to keep its benchmark rate at a record low.
Members of the Bank’s monetary policy committee decided to maintain the repo rate at 3.5%, matching the median forecast of 19 economists surveyed by Bloomberg.
Governor Lesetja Kganyago and other members of the committee have consistently emphasised their willingness to support the economy with historically low interest rates while their forecasts show that inflation is likely to anchor near the midpoint of the Bank’s 3%-6% target range.
“Though the monetary policy committee still considered the risks to the short-term inflation outlook to be tilted to the upside, the decision was based on steady inflation expectations, a benign outlook and modest growth prospects over the next two years,” Nedbank group’s economic unit said.
“We still forecast no change in interest rates this year, followed by a moderate 100 bps hike in 2022.”
The rand strengthened to an intraday high of R14.5625/$, its best level in more than a week. At 5.03pm, it had strengthened 1.15% to R14.643/$, 0.75% to R17.1923/€ and 0.2% to R20.1172/£. The euro had gained 0.46% to $1.17457.
On Wednesday, the US Federal Reserve indicated the time was coming for it to ease the monetary stimulus that sustained the US throughout the pandemic. While the Fed did not say when it would start tapering, it indicated that interest-rate hikes would follow shortly thereafter.
“Markets are now expecting tapering to start in November, though it could begin as soon as October,” said Oanda senior market analyst Jeffrey Halley. “There is no doubt plenty of excitement and volatility still to come our way over the rest of the year.”
After losing 2.24% on Monday and falling its lowest level since January, the JSE all share ended the week 1.89% higher. The biggest winners for the week were precious metals, industrials, and financials, which added 2.36%, 2.29% and 2.2%, respectively. Local markets will be closed on Friday as SA observes Heritage Day.
The all share gained 1.1% to 64,049.05 points on Thursday, and the top 40 added 1.24%. Industrials rose 1.65%, financials 1.06% and banks 0.94%. Gold lost 1.11% to $1,748.16/oz, while platinum was little changed at $995.48. Brent crude was 1.50% firmer at $76.98 a barrel.