Today’s South African Reserve Bank MPC decision is expected to maintain its Repo rate stable at 6.50% due to moderating inflation expectations within target corridor of 3-6% along with improving framework conditions for EM countries.
Therefore, we expect the SARB to avoid raising rates for now, due to current weak economic condition. However, the economic growth outlook is expected to improve, as the country will be benefitting from a weaker currency, thus improving its export potential. Nonetheless, the SARB will be taking careful attention at the impact of imported inflation, the side effect of depreciating currencies.
USD/ZAR is currently trading at 14.45, as EM currencies are strengthening across the board. The pair is expected to head along 14.30 in the short-term.
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