Forex Investment and Currency Trading

The South African Reserve Bank disappointed markets by raising its repo rate by ‘only’ 50 bps today. Hawkish rhetoric from several MPC members in the run-up to the June meeting had encouraged market expectations for a more aggressive interest rate move, and a full 100 bps had been priced in. The SARB Governor himself had spoken of the need to take ‘drastic’ action to rein in inflation, and when pushed to explain what ‘drastic’ might mean, said that even 200 bps was possible. Unsurprisingly, the ZAR weakened sharply on the back of today’s rate decision.
While a 50 bps rate hike [...]

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Mboweni’s comments
‘It doesn’t take a genius to know that rates are going up’. These comments by SARB Governor Tito Mboweni a few days ago, together with the admission that he had spoken to his MPC colleagues about the possibility of a 200 bps rate hike, triggered a sharp selloff in South African interest rate markets. Combined with the release of worse than expected inflation data for April (CPIX at 10.4% y/y), this sealed the case for a further interest rate hike in June. Despite the fact that the SARB had until then expressed a clear preference for gradual tightening, moving [...]

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The SARB Monetary Policy Committee raised interest rates today by 50 bps, in line with the expectation. Although the difficulty of the decision was played down by SARB Governor Tito Mboweni during the press conference that followed (he claimed that every monetary policy decision since 1999 had been difficult – a marked contrast to his comments at the time of the last MPC meeting in Jan when he quipped that it had taken all of 5 minutes to decide to keep interest rates on hold), it is clear that this meeting was a tough call.
Analysts were divided over the prospect [...]

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The April 10th interest rate decision of the South African Reserve Bank was always going to be a tough call, and recent developments in South Africa have only added to the uncertainty. It is now quite clear that the economy is slowing, with the country’s power crisis and the recent reintroduction of load shedding for consumers unlikely to help much. Survey readings for both business and consumer confidence have decelerated sharply in Q1, albeit from reasonably healthy levels just prior to the power crisis. Certainly, as the
jokes doing the rounds in South Africa attest (‘Question - what did South Africa [...]

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