Standard Bank Research Team
Standard Bank
The rand touched 14.08 against the dollar yesterday – its lowest point on record. This comes a day after the SARB decided to keep rates unchanged. That said, looking at other EMs, the SARB’s decision had again little to do with the move in the rand.
Equity markets globally had another down day yesterday. Equity market performance remains a key driver of EM currencies in the current market environment. US equity futures are marginally higher this morning, perhaps signalling a positive start to US trading later today.
Despite the dovish FOMC statement last week, Fed officials continue their hawkish tone. In the US, Janet Yellen, the Federal Reserve chair, made a speech in Massachusetts in which she said that she expects that the Fed will raise rates later this year.
CPI data out of Japan this morning indicates that Japan has fallen back into deflation for the first time since April 2003. Core inflation, which strips out fresh food prices, was -0.1% for August, down from a reading of 0% in July.
The SARB met this week to decide on the course of monetary policy. We expected the Bank to keep the repo rate unchanged at 6.0%, following a rate hike of 25 bps at the July meeting. In the event, the SARB kept the repo rate unchanged.
We thought the MPC statement was hawkish and it is clear that the “MPC remains on a gradual policy normalisation path” as the SARB “assesses the overall risks to the inflation outlook to be on the upside”.
Stats SA released the August CPI data on Wednesday. In the event, CPI came in at 4.6% y/y. The slowdown was indeed in part due to the fall in the price of petrol, which shaved 0.2ppts off July’s print.
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