Reserve Bank unfazed by weak rand
A policymaker at South Africa’s central bank downplayed the potential impact of the rand’s recent weakness on inflation in remarks ahead of its rate-setting meeting later this month.
According to people familiar with the matter, David Fowkes, a member of the central bank’s monetary policy committee, suggested that the currency’s recent decline isn’t a major inflation concern in a virtual private meeting with investors on Tuesday.
The rand, a bellwether for emerging market currencies, has depreciated almost 8% against the dollar since Donald Trump won the US election on Nov. 5.
Its weakness has been linked to a global pullback from emerging markets, fueled by US tariff threats and reduced expectations for Federal Reserve rate cuts.
Still tight
Fowkes also emphasized that the central bank still sees its monetary stance as tight, according to the people familiar with the matter, who asked not to be named due to the private nature of the discussion.
The MPC has cut its key interest rate by 50 basis points to 7.75% since commencing an easing cycle in September but the benchmark still stands 4.85 percentage points above annual inflation.
The central bank declined to comment.
Fowkes also said the MPC remains focused on anchoring inflation expectations at the midpoint of its 3%-6% target range.
Forward-rate agreements, used to speculate on borrowing costs, are pricing in just a single 25-basis-point rate cut in 2025 at the conclusion of the MPC’s meeting on January 30.
Governor Lesetja Kganyago has consistently stated that policymakers will proceed carefully, even as its models signal further rate cuts.
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