The rand’s recent deterioration may force the Reserve Bank to consider earlier interest-rate increases despite economic growth remaining subdued. Rate hikes might be necessary to blunt further weakness in a stronger dollar environment, analysts said. This despite the economy contracting 2.2% in the first quarter. The Bank has said its models imply one rate increase of 25 basis points in the final quarter of 2018 and a similar increase in mid-2019. It emphasised that the bottom of the inflation cycle had been reached. SA with its fiscal and current deficits is particularly vulnerable to risk-off sentiment. "The economy is not in a position to afford rate hikes, but the question is whether the Bank can afford not to hike in the present environment," said Herenya Capital Advisors trader Petri Redelinghuys. The rand tumbled through R13 to the dollar on Friday, reaching a six-month low of R13.2871/$, before recovering as the euro fell to $1.1745. Economists said the Bank would be loath t...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.