RESERVE BANK MEETING
Interest rate cut unlikely amid risks to currency
Uncertainty about the rand exchange rate, as well as food prices, have put question marks over the sustainability of inflation drop
The Reserve Bank’s monetary policy committee is expected to keep interest rates on hold this week, with the high level of uncertainty and risks to the rand outweighing a better inflation outlook and weak economic growth prospects. The committee last met in March, in the week between the recall of former finance minister Pravin Gordhan from an international road show and the Cabinet reshuffle which resulted in Gordhan being ousted and SA’s rating junked. It begins its three-day May meeting on Tuesday with the rand almost R1 weaker against the dollar than it was before the recall. Favourable global sentiment towards emerging markets helped to prevent the currency taking a big hit from the downgrade, but the rand’s tumble on Thursday, on market concerns about Brazil, served as a reminder of its vulnerability. Although economists expect inflation to come down below the top of the 3%-6% target range in 2017, uncertainty about the rand exchange rate, as well as food prices, have put quest...
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