This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
There were no real surprises at the conclusion of the Monetary Policy Committee meeting as the South African Reserve Bank kept lending rates unchanged.
Some key takeaways from the meeting were as follows:
- Inflation is well within the targeted 3% to 6% range, although the low point of the cycle is believed to be behind us
- Higher oil prices impact on inflation will be somewhat moderated by lower food price inflation
- Risks to the inflation outlook have started to materialize, with international events adding upward pressure to the figure
- The Reserve Bank’s estimates for GDP growth in 2018 has been revised lower, from 1.7% to 1.2%
The Reserve Bank has also said that it believes the rand to be undervalued at present although expects the currency along with its emerging market peers to remain volatile.
The rand weakened on the day (around 1.5% vs the USD) where risk off sentiment saw emerging currencies in general under pressure. The revised GDP estimates from the central bank perhaps provided some of a domestic catalyst for a further under performance of the rand.
Rand – Technical View