JOHANNESBURG (Reuters) – Below are some comments from analysts and investors after the South African Reserve Bank (SARB) raised its main lending rate, also called repo rate, by 50 basis points to 8.25%.
JASON TUVEY, DEPUTY CHIEF EMERGING MARKETS ECONOMIST, CAPITAL ECONOMICS
“We think today’s decision marks the end of the tightening cycle. Inflation should continue to drop over the coming months, bringing it back within the SARB’s 3-6% target range by the middle of this year.”
“Rate cuts will probably materialise in late-2023. But if further evidence materialises that loadshedding is fuelling price pressures, the SARB may feel compelled to keep rates high for longer.”
GARY BOOYSEN, RAND SWISS PORTFOLIO MANAGER
“The currency immediately weakened 35c against the US dollar, as some traders may have been expecting a 75bps hike. This was outside the upper end of the most recent polling data but given the weaker currency it seems the expectation was in the market.”
WARREN VENKETAS, DAILYFX ANALYST
“The SARB’s decision to hike rates by 50bps seemed to have been driven by the first half of the SARB’s primary mandate to protect the value rand. Short-term, low to middle income householders will feel the pain but with a resilient US economy at play, I am not sure whether this will be enough to cap rand losses against the US dollar just yet.”
JAMES WILSON, EMERGING MARKET SOVEREIGN STRATEGIST, ING
“The worsening growth outlook due to persistent power cuts and recent increase in geopolitical tensions are clear concerns for the market, while USD strength is an additional global factor, and the rand is generally fairly sensitive to market sentiment in the EMFX space.”
LYLE SANKAR, HEAD OF FIXED INCOME, PSG ASSET MANAGEMENT
“I would have thought the market would be comfortable with the rate increase, however sentiment is really poor currently. Long bonds are close to 13% yields.”
MURENDENI NENGOVHELA, ECONOMIST, ALEX FORBES
“The main driver around this hike is actually the rand weakness. The rand has actually weakened around 5% since they had their last meeting. The other layer to this is the core inflation, which is a demand-driven inflation, it remained quite sticky at 5.3% in April, which is the highest in over six years.”
(Compiled by Tannur Anders, Rachel Savage, Promit Mukherjee in Johannesburg and Amruta Khandekar in Bangalore; Editing by James Macharia Chege)
