The South African Reserve Bank (SARB) 's monetary policy committee (MPC) will announce the interest rate decisions today at 15:00 SAST.
Here is what we can possibly expect...
Super Thursday kicks off with a bang as the U.S Federal Reserve saw a 7-3 vote in favour of a rate cut on Wednesday as expected. With the current target rate at 175-200, the FOMC described the economic outlook as favourable and will take it "meeting by meeting" when making rate decisions. Fed chair Jerome Powell said the rate cut was designed "to provide insurance against ongoing risks" including weak global growth and resurgent trade tensions.
Locally the South African Reserve Bank (SARB) 's tone might become more dovish as the current Global economic backdrop continues to support a Monetary easing policy. Today's decision might be that of caution as economic growth remains subdued, the risk of rising fuel costs due to Saudi oil facility attack and a volatile Rand (ZAR) might just sway the MPC to hold off.
Interest rates in focus:
- The Repurchase rate or (Repo Rate) is the rate at which private banks borrow from the SA Reserve Bank, and the market consensus is that the current rate is to remain at 6.50%.
- The Prime lending rate or (Prime Rate) is our benchmark rate at which the private banks lend out to the public, and the outlook is that the Prime rate will also remain at 10.00%.
Inflation numbers: The Consumers Price Index (CPI) surprised increase was more than analysts' estimated in August and grew 4.3%. CPI is still within the South African Reserve Bank (SARB) 's target range of 3-6 percent. Food inflation was the one of the main attributes and most worrisome as it reached an 18-month peak at 3.8%
- The inflation number is currently observed as a substantial increase in inflation might just trigger the South African Reserve Bank's monetary policy committee to increase interest rates.
The Rand Outlook:
We have seen some strength return to the local currency over the last couple of weeks mainly due to a weakening Dollar, but it seems to have been short-lived. The Fed decision has seen the U.S Dollar gain strength, which in turn has seen the Rand fall out of favour.
By looking at the chart of the USDZAR currency pair below we might expect the currency pair to move higher back to the 15.00 level as the Rand weakens.
Source - Bloomberg Source – Bloomberg
Economic factors to look out for today: (Super Thursday)
- JPY Interest Rate Decision at 05:00 SAST.
- NOK Interest Rate Decision at 10:00
- BoE Interest Rate Decision at 13:00 SAST.
- South Africa Interest Rate Decision at 15:00 SAST.
- U.S Existing Home Sales at 16:00 SAST.
When and what time is the South African interest rate announced in South Africa?
19th of September 2019 at 15.00 SAST.
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