Markets are pricing in the possibility of an interest rate hike in 2018 as the rand falls, despite economists saying it is unlikely as inflation expectations have not breached the upper end of the Reserve Bank’s target range. The rand has slumped nearly 9% against the dollar year to date, hurt by global risk-off sentiment and poor domestic economic data. Capital Economics senior emerging markets economist John Ashbourne said the currency fall had raised speculation that policy makers would follow some emerging market countries that have started raising interest rates. Some countries have moved as a pick-up in their economy or other factors push up inflation, while others are being forced to act to steady currencies. Maintain vigilance A Reuters poll showed last week that economists expect the Bank to keep its repo rate unchanged at 6.5% until 2020. "We think that markets are getting ahead of themselves by pricing in rate hikes…. We do not think that this is likely," Ashbourne said...
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