Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions
By Bianca Botes, Corporate Treasury Manager at Peregrine Treasury Solutions.
Following the announcement by the MPC to keep interest rates unchanged, the rand has shown little reaction, however there are a few key elements that can see the rand come under pressure as the market digests the comments by the Governor.
- A downward adjustment in forecast GDP to 1.2% is a tough blow to an already struggling economy and our efforts to appease ratings agencies. A decrease in economic growth will also paint a bleak picture for potential investors.
- While many consumers are calling for an interest rate cut to stimulate the economy, it has become clear that the inflation cycle in South Africa has bottomed and that potential rate hikes in the first half of 2019 is more likely to take place.
The rand lost 1.59% against the greenback today, trading at R13.50/$, largely on the back of a hawkish Federal Reserve, however subdued economic growth expectations, coupled with soft economic data releases will increase the pressure on the local unit.
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