Latest news with #AnnabelBishop
News24
5 days ago
- Business
- News24
Rand hits strongest level in months
• For more financial news, go to the News24 Business front page. The rand was trading below R17.74/$ on Thursday afternoon, the local currency's best level since December last year. It has gained almost 3% over the past month. The dollar has been under renewed pressure this week as disappointing labour data fuelled concerns about the US economy. Investors are also worried about how new tax cuts will worsen that country's debt crisis. The rand has now strengthened by more than R2 against the dollar since April, when it traded above R19.90/$ amid fears of a DA exit from the Government of National Unity (GNU). At the time, the rand was also hurt by a global sell-off of riskier assets amid the turmoil unleashed by US president Donald Trump's trade tariffs. Since then, sentiment has improved somewhat, bolstering riskier assets like the rand, as the US has been amenable to reducing tariffs through negotiations, says Investec chief economist Annabel Bishop. The survival of the GNU, and the well-received third iteration of the Budget, have underpinned rand strength in recent weeks. On Wednesday, the 10-year government bond yield reached its strongest level in more than three years, falling below 10% after parliament's finance committee voted in favour of the National Treasury's fiscal framework. This paves the way for Budget 3.0 to be adopted by Parliament. In addition, the SA Reserve Bank's campaign to lower the inflation target to 3% (from a band of 3% to 6%) has also bolstered the rand and bonds. Lower inflation will be positive for both assets, but a stricter target would also require stricter monetary policy. High interest rates make rand assets attractive to foreign investors looking to earn yield. Bishop said that the Reserve Bank's interest rate cut last week triggered 'mild' rand weakness, as the interest rate difference between SA and the US narrowed somewhat. The market is expecting two rate cuts of 25 basis points each in the US this year, but these are only anticipated from the final quarter of 2025. 'However, further US interest rate cuts are built into market expectations for 2026 and 2027, allowing for further rand strength against the US dollar in the period,' said Bishop. In the near term, however, rand strength may be limited. Markets tend to become more risk-averse as the Northern Hemisphere's summer approaches and many traders reduce their investments in riskier assets over the period while they are on holiday, Bishop added. She says the rand's fair value (typically based on factors like trade, inflation differences and interest rates) was close to R16/$, but it is not expected to strengthen to that level until the fundamentals for economic growth improve in South Africa. As revealed this week, the economy grew by only 0.1% in the first quarter this year, with sharp contractions in mining and manufacturing. 'Persistent weak economic growth in South Africa tends to be a disincentive for foreign investors, along with the rand's depreciation trend,' said Bishop. While there has been foreign interest in local bonds, global investors remain sellers of SA shares. On Thursday, the rand gained slightly against the euro as the European Central Bank cut interest rates by a quarter point for the seventh time in a row, leaving the bank's rate at two percent. SA's repo rate is at 7.25%. The rand was trading at R20.29/euro on Thursday afternoon. It started the year at around R19.50.
IOL News
27-05-2025
- Business
- IOL News
Likely interest rate cut next week brings thousands in savings, but higher rates could follow
Economists agree that the South African Reserve Bank (SARB) will drop interest rates at its meeting next week, with an announcement expected on Thursday at 2pm. However, future cuts could be scuppered if the inflation target is dropped. Image: Pixabay Economists agree that the South African Reserve Bank (SARB) will drop interest rates at its meeting next week, with an announcement expected on Thursday at 2pm. However, future cuts could be scuppered if the inflation target is dropped. The rate at which SARB lends to local banks is currently 7.5%, with banks generally lending at 11% to consumers, unless they are not high risk, in which case borrowers can get a rate that is below prime. Based on calculations using ooba homeloans' online tool, a homeowner will save R2 040 over a year if they have a R1 million home they are paying off over the standard 20-year period. These calculations have been worked out on an interest rate of 11% and then 10.75%, which is in line with others freely available on the internet. Interest rate effects on home and car repayments. Image: IOL Taking the average price of a car in South Africa of R400 000, the annual saving will be R612 – using an Auto Trader calculator with the same prime rate figures as for a home, although the results would be the same with any other calculator that can be found online. The Bloomberg consensus is for a 0.25 percentage point cut. Investec chief economist, Annabel Bishop, noted that 'lengthy signalling of a lowering of the inflation target, but no announcement, has also led to expectations of an interest rate cut'. Andre Cilliers, currency strategist at TreasuryONE, said the SARB's Monetary Policy Committee 'is expected to cut rates by 25bps given the recent inflation data and strong recovery in the rand'. Meanwhile, Old Mutual chief economist, Johann Els, has previously said that he expected an interest rate cut, also of 25 percentage points, next week on the back of a stronger rand. The currency opened at R17.89 on Tuesday morning, a level at which it has been lingering after breaking through R18. Casey Sprake, economist at Anchor Capital, has previously told IOL that the latest inflation data, of 2.8% as of April, strengthens the case for monetary easing. 'We expect SARB to cut the repo rate by 25 basis points at its upcoming MPC meeting on May 29,' she added. However, a lower 'inflation target risks scuppering interest rate cuts this year,' warns Bishop. As a result, she said that 'with a change to the inflation target reportedly occurring soon this year, the SARB could choose to cut interest rates this month to avoid the limitation of doing so in the future but then could easily be at risk of needing to reverse the cut.' Bishop noted that the inflation rate target, currently between 3% and 6%, is likely to be lowered, with the Reserve Bank having said that this is imminent, although the Finance Department is responsible for changing the target.
IOL News
21-05-2025
- Business
- IOL News
Enoch Godongwana presents South Africa's 2025 Budget: GDP growth forecast revised down
Minister of Finance, Enoch Godongwana, tabled the 2025 Budget Speech during the National Assembly plenary at the Cape Town International Convention Centre. In presenting the third iteration of the National Budget, Finance Minister Enoch Godongwana said that gross domestic product (GDP) for the year would come in at 1.4% this year, down from a previously predicted 1.9%. Recently, ratings agency Moody's dropped South Africa's expected GDP growth to come in at 1.5%, down from its initial 1.7% figure, while the South African Reserve Bank previously anticipated 1.7% and the International Monetary Fund had an estimate of 0.8%. Last year, overall growth was 0.6%. A government and business partnerships had been aiming for 3% this year to create a million jobs. Ahead of the National Budget, Investec chief economist, Annabel Bishop, said that 2025 is likely to see GDP growth of 1.3% year-on-year, revised down from 1.8% at the start of the year. The Bloomberg economic consensus for GDP growth this year is currently 1.4% year-on-year, she noted.
IOL News
21-05-2025
- Business
- IOL News
BREAKING: Rate of increase in cost of living accelerates in April
Food basket. The rate of increase in the Consumer Price Index (CPI) went up a percentage point in April The rate of increase in the Consumer Price Index (CPI) went up a percentage point in April, to 2.8%, when compared to March's 2.7%, defying expectations from at least one economist that it would come down. Old Mutual chief economist, Johann Els, had been hopeful that it would drop to 2.66%, or even 2.5%. However, Investec chief economist, Annabel Bishop, had expected the rate of increase in CPI to be nearer to 3% for the month of April. Statistics South Africa data out on Wednesday morning indicated that the higher rate was driven higher by housing and utilities, food and non-alcoholic beverages, alcoholic beverages and tobacco, as well as restaurants and accommodation services. Food inflation has been a particular bugbear in terms of monthly increases. Earlier this month, the agency noted that year-on-year, income from accommodation increased by 12.2% in February. This was the result of a 2.4% increase in the number of stay unit nights sold and a 9.5% increase in the average income per stay unit night sold. Sectors that aided keeping inflation well inside the target band of 3% to 6% included slower cost of living gains in goods and services. South African Reserve Bank (SARB) Governor Lesetja Kganyago has been publicly suggesting that the target band will be shrunk for some time, which can only be done if National Treasury implements the necessary policies 'Markets are anticipating the announcement of a new inflation target, with the range currently 3% to 6% year-on-year and the midpoint of 4.5% year-on-year. National Treasury is likely to prefer a gradual descent, as opposed to the SARB's preference of close to 3% year-on-year,' Annabel Bishop. In a recently published note, Statistics South Africa explained that the inflation basket of goods and services forms the foundation for calculating CPI. It identifies products that South African households spend the most money on, and these are incorporated into the basket. The current version of the basket, updated in January 2025, consists of 391 products. The basket was updated towards the end of January. Prior to this, it last updated the basket in 2022, using data from 2019. The weights are now based on data for 2023. Through a complicated process, the official statistical agency determines weights of each product and calculates the increase in prices, which then informs inflation. Statistics South Africa does not measure the entire basket each month, a rider on the data release noted. IOL
IOL News
07-05-2025
- Business
- IOL News
Rand strengthens as US interest rate decision looms
The local currency is gaining ground on the dollar as market watchers keenly await the outcome of the United States' Federal Reserve interest rate decision on Wednesday. Image: Pixabay The local currency is gaining ground on the dollar as market watchers keenly await the outcome of the United States' Federal Reserve interest rate decision on Wednesday. On Tuesday, around mid-morning, the rand was trading at its lowest level in a month, having dropped to R18.26 from a monthly peak of R19.76 on April 8. This steady positive trend is the result of investor sentiment turning towards riskier assets, Investec chief economist Annabel Bishop said in a recent note. ALSI performance in Rands Image: LSEG Datastream Bishop noted that the rand's movement continues to be dominated by events in the US on the back of weak US data, including a 0.3% year-on-year contraction in that superpower's gross domestic product for the first quarter of the year. The Fed is expected to cut interest rates by 0.25 percentage points at three meetings before year-end, which is positive for the rand, Bishop said. Should the South African Reserve Bank take its cue from the States, consumers locally may also benefit from interest rate cuts. Statistics South Africa is set to release the latest inflation data on May 21, the same day that Budget 3.0 will be tabled. Inflation is currently at 2.7% year-on-year and the Reserve Bank's Monetary Policy Committee will announce its decision on interest rates on May 29, by which time the latest cost of living figures can be considered as part of its thought process. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ The Rand's performance Image: Morningstar Peter Little, fund manager at Anchor Capital, said that inflation is currently below expectations and there is very little inflationary pressure. The core inflation rate has now spent eight months below the mid-point of the South African Reserve Bank's target inflation range of 3% to 6%, he said. Bishop noted that Investec anticipates that the domestic currency will average R18.60 for the second quarter. However, as financial markets become keener on riskier assets given dollar weakness and general US economic issues on the back of US President Donald Trump's tariff war, the local currency will benefit, she said. Investec expects the currency to subside back towards R18.00 this month and average R16.80 this quarter. In his weekly note, Old Mutual wealth investment strategist, Izak Odendaal said that 'the rand, meanwhile, behaved exactly as one would expect during an episode of extreme global risk aversion'. 'The rand typically sells off when global investors are jittery and then stabilises and strengthens. It just happened on a very compressed timescale, highlighting once again how difficult it is to time the currency,' Odendaal said. The JSE is also seeing gains, having recovered from a rout at the beginning of last month to end April 'comfortably in positive territory,' said Little. Odendaal added that local equities more than retraced their losses, and the FTSE/JSE All Share Index is at an all-time high of above 90,000 points. 'This is a 20%-plus return over the past year.' Little added that the 'JSE's rally started with easing tariff-related concerns as the US announced a 90-day pause on implementing reciprocal tariffs, allowing countries time to negotiate better trade terms'.
