South Africa’s central bank confirmed its dovish policy on Wednesday, lowering its interest rate on repos by 25 basis points to 6.50%, its lowest since January 2016. February’s consumer price index shows that inflation is under control at 4% annualised (January: 4.40%) and is expected to slow in March, as the rand has strengthened since the middle of November 2017 (USD/ZAR: -18.28%). The resignation of President Jacob Zuma (and the stepdown of Zimbabwe’s President Robert Mugabe’s) have boosted the ZAR, thus reducing the cost of imports in the country.
With treasuries gradually nearing investment-grade rankings from all three major rating agencies, South Africa’s economy showing clear signs of improvement. With improved manufacturing and increasing exports in March, we expect GDP growth to head towards the 1.80% range (February: 1.50%). USD/ZAR is trading at 11.82, bouncing back from a 11.62 low earlier this week and continuing its short-term rise toward 11.83.
By Vincent Mivelaz
