South Africa’s rand is highly dependent on the decisions of the US Federal Reserve, and domestic issues, such as election polls, are often dwarfed by changing sentiments regarding the US central bank. <\/p>\n\n\n\n
The US dollar is the global currency reserve, so all financial assets worldwide price the Fed’s policy interest rate, as the US financial markets dwarf all others. <\/p>\n\n\n\n
Old Mutual Wealth Investment Strategist Izak Odendaal said that the Fed, in turn, makes decisions based on achieving two objectives: stable prices and maximum employment. <\/p>\n\n\n\n
The inflation target is set at 2%, while the employment goal is ideally in the range of 3.5% to 4.5%. <\/p>\n\n\n\n
“Above that, there are people who want to work but can\u2019t find jobs; below that, there is a shortage of workers, and an overheating economy. This, in turn, could undermine the inflation goal,” said Odendaal. <\/p>\n\n\n\n
Not all central banks have an explicit dual mandate. The South African Reserve Bank’s mandate is stable inflation, with a target range of between 3% and 6%. <\/p>\n\n\n\n