Rand Report: Rand firms ahead of the SARB interest rate decision

This figure was well above analyst expectations of 1.9% and marks the third month of consecutive growth in retail trade.

However, the rebound in economic activity has had an impact on consumer prices. South Africa’s inflation rate came in at 5.9% (year-on-year) for the month of December. This reading exceeded analyst forecasts of a rise from 5.5% towards 5.7%. This most recent reading puts inflation just beneath the South African Reserve Bank’s (SARB) upward bound of 6%. On a monthly basis, upwards price pressure added another 0.6%. Rising costs of transportation and fuel, as well as prices for food and beverages, were the main contributors.

Positive economic data, coupled with higher inflation numbers and increased pressures to raise interest rates had a strengthening effect on the rand. The GBP/ZAR pair moved down by 2.74% throughout the course of last week, closing off at R20.45 from an open of R21.05. EUR/ZAR depreciated by a comparable 2.52%, falling from R17.56 and ending the week at R17.11. USD/ZAR fared slightly better, shedding 1.89% and capping off the week at around the R15.10 level. 

This week, the SARB will release their most recent interest rate decision. Investors will be watching closely, with many analysts predicting a rise to 4%. This would come after the SARB raised their benchmark repo rate to 3.75% in November. This was the first rate hike in three years, as South Africa’s central bank works to keep inflation expectations well anchored.

Weekly market events

Wednesday 26 January

US: Fed interest rate decision

Thursday 27 January

SA: Interest rate decision

US: Durable goods orders

Friday 28 January

EU: Economic sentiment (Jan)

US: Personal income and spending (Dec)

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