The South African Rand traded within a tight range against the US Dollar on Monday ahead of the Federal Reserve’s and the South African Reserve Bank’s (SARB) policy decisions on Wednesday and Thursday respectively.
The SARB is largely expected to leave its benchmark interest rate without change at a 14-year high of 8.25% at its September meeting.
“The SARB is expected to keep rates unchanged but remain hawkish on the back of concerns of an uptick in inflation on the back of the higher fuel price,” Andre Cilliers, currency strategist at TreasuryONE, was quoted as saying by Reuters.
In July, the SARB Governor said the decision to put key repo rate on hold did not represent the end of the bank’s tightening cycle or that interest rates had peaked.
The SARB also revised down its 2023 inflation forecast to 6% from a previously expected annual level of 6.2%, mostly due to softer food and core prices. Yet, it warned upside risks still held.
South Africa’s headline inflation slowed to 5.4% in June, while returning to the central bank’s target range of 3% to 6% for the first time in 14 months. The rate is expected to sustainably decelerate to 4.5% by the third quarter of 2025.
Meanwhile, the Federal Reserve is also likely to leave interest rates unchanged this month, “but with a hawkish outlook given the higher oil price and higher inflation numbers,” according to Cilliers.
As of 9:18 GMT on Monday USD/ZAR was edging up 0.21% on the day to trade at 18.9982.
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