{"id":219747,"date":"2018-01-17T14:44:09","date_gmt":"2018-01-17T12:44:09","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=219747"},"modified":"2018-01-17T14:44:09","modified_gmt":"2018-01-17T12:44:09","slug":"a-rate-cut-is-back-on-the-table-as-rand-hits-strongest-levels-since-2015","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/219747\/a-rate-cut-is-back-on-the-table-as-rand-hits-strongest-levels-since-2015\/","title":{"rendered":"A rate cut is back on the table as rand hits strongest levels since 2015"},"content":{"rendered":"
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Two months can be a long time in monetary policy as well as politics.<\/p>\n

When the South African Reserve Bank\u2019s rate-setting committee met in November, the rand was at a year-low, inflation expectations exceeded the 6% upper end of the target range and the bank\u2019s forecast models showed more increases over the next two years.<\/p>\n

This week, the Monetary Policy Committee meets in a world where the currency is at its strongest level since mid-2015, boosted by Cyril Ramaphosa\u2019s election as president of the ruling African National Congress, causing price-growth expectations to fall.<\/p>\n

Politics will continue to play in the back of the committee\u2019s mind despite the favorable outcome of the ANC leadership election, especially after the party decided the central bank, which has private shareholders, should be nationalized. But\u00a0slowing inflation expectations mean rate cuts are back on the table, even though few economists expect a move on Thursday.<\/p>\n

\u201cThings have changed,\u201d Gina Schoeman, an economist at Citigroup Global Markets, said by phone from Johannesburg. \u201cRate cuts are definitely, at this point, more likely than rate hikes.\u201d<\/p>\n

All but six of the 19 economists surveyed by Bloomberg forecast the MPC will leave its benchmark rate unchanged at 6.75%. Five predict a quarter percentage point cut and one, Abri du Plessis at Gryphon Asset Management, says the committee will lower the rate by half a percentage point.<\/p>\n

Inflation Slows<\/strong><\/p>\n

\u201cInflation is probably going to drop now, or in the next month or so, and it is going to be more difficult for them to cut rates later\u201d when price growth may resume an upward trend, he said from Cape Town.<\/p>\n

Inflation expectations, as measured by the five-year breakeven rate, have fallen 51 basis points since Nov. 23, when the MPC voted unanimously to keep borrowing costs unchanged. Price growth slowed to 4.6% in November.<\/p>\n

Forward-rate agreements starting in 12 months, used to speculate on borrowing costs over the period, show investors have moved to pricing in 44 basis points of rate cuts this year, compared with 52 basis points of tightening four days before Ramaphosa\u2019s election. The leadership change helped the rand to its best monthly rally since 2009 in December.<\/p>\n

The ruling party\u2019s highest decision-making body will discuss its decision about the central bank\u2019s ownership at a meeting that starts Thursday, the head of the ANC economic transformation committee, Enoch Godongwana, said.<\/p>\n

While Ramaphosa said on the weekend the mandate and independence of the central bank won\u2019t be meddled with, the announcement may play on the MPC\u2019s mind as it debates policy, according to BNP Paribas\u2019 senior economist, Jeffrey Schultz.<\/p>\n

\u201cThey will hold for now, but I do think that the committee will be a little bit more divided,\u201d Schultz said by phone. \u201cPolitics has become an increasingly important part of the way you view South Africa and the economy.\u201d<\/p>\n

\"\"<\/a><\/p>\n

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Read: Rand hits key strength level as Zuma exit talk heats up<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

This week, the Monetary Policy Committee meets in a world where the currency is at its strongest level since mid-2015, boosted by Cyril Ramaphosa\u2019s election as president of the ruling African National Congress, causing price-growth expectations to fall.<\/p>\n","protected":false},"author":59,"featured_media":118672,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[],"class_list":["post-219747","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/219747","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=219747"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/219747\/revisions"}],"predecessor-version":[{"id":219753,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/219747\/revisions\/219753"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/118672"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=219747"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=219747"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=219747"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}