South African Rand Declines Following Central Bank’s Interest Rate Decision
The South African rand weakened as the central bank held the interest rate steady at 7.50%. The rand traded at 18.22 against the dollar, reflecting a 0.5% decline. Central bank Governor Lesetja Kganyago indicated that higher rates may persist due to inflation risks. Meanwhile, the stock market indicated mixed performance, with the Top-40 index down 0.8%.
On March 20, 2023, the South African rand experienced a decline as the central bank decided to maintain its main interest rate at 7.50%. At 1352 GMT, the currency traded at 18.22 against the U.S. dollar, marking a 0.5% decrease from the previous close. This movement in the rand occurred as the dollar appreciated by 0.7% against a basket of other currencies, following the U.S. Federal Reserve’s recent decisions regarding interest rates and economic growth forecasts.
The South African Reserve Bank (SARB) chose to pause its rate-cutting cycle amidst persistent risks from international trade disputes and domestic budgetary issues, despite maintaining low inflation levels. Central bank Governor Lesetja Kganyago noted, “Some policy adjustments by major central banks are still expected this year, but rates are likely to remain high for longer, given new inflation risks.” This sentiment aligns with expectations from economists who anticipated the rate would be held steady.
In financial markets, South Africa’s Top-40 index reflected a decline, trading approximately 0.8% lower. In contrast, the benchmark 2030 government bond showed slight strength with a yield decrease of 3.5 basis points, bringing it to 9.05%.
In summary, South Africa’s rand weakened following the central bank’s decision to maintain the interest rate, reflecting concerns over international trade and domestic fiscal challenges. The rand’s decline, coupled with mixed signals in financial markets, indicates a cautious outlook as policymakers navigate ongoing inflation risks. Governor Kganyago’s remarks further emphasize the expectation of sustained high interest rates amid these challenges.
Original Source: www.cnbcafrica.com
