RAND AND INTEREST RATES
HILARY JOFFE: Reserve Bank is alert to clear and present danger
The clear and present danger to the rand will surely vindicate an ultra-cautious stance by the monetary policy committee
Three days ago, it might have been a challenge for the Reserve Bank’s monetary policy committee to justify why it had no plans to start cutting interest rates some time soon. The rand opened on Monday morning at its strongest level in almost two years — since well before Nenegate. Global and domestic factors suggested the rand’s strength could continue, which would be good for the inflation outlook. Though the committee has not been expected to do anything to rates at its meeting this week, a good few economists and fund managers had started to look to at least one and possibly two rate cuts later in 2017, with more to come in 2018. Then came the road show recall, which we have to assume is the start of the showdown that has to happen between President Jacob Zuma and friends, and Finance Minister Pravin Gordhan. The rand dropped 3%-4% and then pulled back some, but the somewhat muddled response of the market to the recall is nothing compared with what’s likely to happen if Gordhan i...
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