Latest news with #SouthAfricanReserveBank
IOL News
14 hours ago
- Business
- IOL News
How the Rand's pressure mounts ahead of key interest rate decision and US trade deadline
The rand is under pressure, hovering at R17.90 against the dollar. Image: Armand Hough /Independent Newspapers The South African Reserve Bank's interest rate decision on Thursday comes at a critical moment, just one day before South Africa's deadline to secure a trade deal with the US expires. Failure to reach an agreement could add 30% to the cost of exports to America, threatening thousands of jobs and weighing on economic growth, while the rand trades weaker near R17.90 against the dollar amid mounting uncertainty. Andre Cilliers, currency strategist at TreasuryONE, added that the rand is trading weaker around the R17.90 level as the rally in the dollar and the lack of any good news on the tariff front ahead of Friday's deadline weigh on the local currency. In Investec chief economist Annabel Bishop's weaky rand note, she said that the pending deadline to strike a deal with the US – with South Africa seemingly have not made progress – would be negative for the local currency. The trade tax order, signed by US President Donald Trump on July 7, follows a suspension of his April 2 'Liberation Day' tariffs, which he placed on pause following an extremely negative market reaction in America. The rand is hedgy ahead of the interest rate announcement and the Trump trade deadline. Image: 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. 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. Advertisement Next Stay Close ✕ The US dollar has risen on the optimism around the progress ahead of the deadline on Friday, which the US's Commerce Secretary Lutnick said will not be extended, and countries which have not struck deals will see July's reciprocal tariffs apply, said Bishop. Nolan Wapenaar, co-chief investment officer at Anchor Capital, said It seems certain that South Africa isn't going to have a deal with the US by Friday. 'I expect that everyone is aware of this by now and there I don't expect a massive impact as we move into August,' he noted. More likely the loss of export revenue will weight on the trade balance adding negative pressure to the rand over time, said Wapenaar. 'Most industries won't really notice, while a handful of sectors, like auto manufacture, will suffer a significant impact,' he said. Wapenaar added that this will translate into job losses and economic losses in a few sectors. 'Economists are all modelling to estimate the impact and, from what I am seeing, this will shave about 0.7% off economic growth. Just not nice,' he said. In 2023, South African exports to the US accounted for around 2.2% of gross domestic product, while around 426,000 of jobs are linked to exports to the US. On the back of both the US Federal Reserve and the South African Reserve Bank announcements on interest rates this week, TreasuryONE expects the rand to remain vulnerable to dollar moves. 'However, a break above the R18.00 is likely to attract exporter inflows,' he said. Bishop also noted that the local currency had weakened on a likely interest rate cut in this week. IOL
IOL News
21 hours ago
- Business
- IOL News
Sarb's potential shift to 3% inflation target could benefit South African economy
Analyses undertaken by the Sarb, the National Treasury, and other experts highlight significant potential benefits from reducing the inflation target to 3%. Image: File Economists have concurred that the South African Reserve Bank (Sarb) could help lower the borrowing costs, boost investor confidence, and economic growth by reducing its inflation targeting to 3% per annum. This comes as discussions have emerged regarding whether South Africa's current inflation target midpoint of 4.5% is consistent with price stability and whether adjusting it to a lower rate might help secure the current trend of low inflation Analyses undertaken by the Sarb, the National Treasury, and other experts highlight significant potential benefits from reducing the inflation target to 3%. Recent comments from the Sarb about potentially lowering the inflation target led market participants to recalibrate inflation expectations downward. According to the Bank of America (BofA) Global Research's latest South Africa Viewpoint on Monday, there is more to gain and less to lose by moving to 3% inflation target. 'We think moving to 3% is almost certain. The Sarb would not have intensified its desire if it did not have buy-in - at least in private if not publicly. Markets would not have reacted positively if the moves were in doubt,' said Tatonga Rusike, BofA's sub-Saharan Africa economist. 'An announcement could be made with the concurrence of the finance minister at either of the upcoming MPC meeting(s) - the Mid-term Budget presentation in October or the Budget 2026 presentation in February. Inflation is already benign and does not require the Sarb to change its current rate cycle. 'Other than influencing expectations through moral suasion, work still needs to be done in publishing the advantages of the 3% inflation target to the non-technical public, price setters and labour unions. South Africa moved from 3-6% to a 4.5% mid-point target in 2017. Reaching it was helped by central bank credibility and supportive supply-side factors - low oil and food prices. The Brent oil price averaged $63 per barrel between 2017 and 2019 while food inflation averaged 7% in 2017, 3.2% in 2018 and 3.1% in 2019. This made it easier to reach 4.5% and the central bank was cutting the policy rate through the cycle. Earlier this year, Sarb Governor Lesetja Kgayango said one particular issue that both advanced and emerging market economies grappled with was making sure that their targets were efficient and aligned with clear and practical definitions of 'price stability'. 'Most advanced economies have settled on maintaining inflation targets at 2%, while emerging markets are closer to the 3% mark,' Kganyago said. 'Early adopters of inflation targeting have updated their frameworks to better reflect changing realities on the ground, with Armenia being the latest central bank to also reduce its target to 3%.' In its latest annual report, the Sarb said the 'main concern with South African inflation is not our ability to hit the target. Rather, it is that our target is high compared to other countries.' The bank said although an inflation rate of 4.5% may seem moderate, it still causes prices to double every 16 years, and this is hard to reconcile with its constitutional obligation to safeguard the value of the currency. Investec chief economist, Annabel Bishop, said concurred with the advocacy for a lower inflation target, asserting that such a move would foster a more advantageous interest rate environment. 'A persistently lower rate of inflation would result in a lower interest rate environment which in turn would benefit the economy, the bond market and consumers. At 3% year-on-year inflation the neutral interest rate would be 5% not 6.5% with inflation at 4.5% year-on-year,' Bishop said. 'In addition, higher than expected tax collections would allow for a reduction in the fiscal deficit and so could reduce the borrowing requirement, again positive for the bond outcome, although the market has largely adopted a wait and see attitude.' BUSINESS REPORT
The Star
a day ago
- Business
- The Star
Mystery surrounds Markus Jooste's 'death'. Show us the grave!
Masabata Mkwananzi | Published 1 hour ago The mystery surrounding the alleged death of former Steinhoff CEO Markus Jooste has given rise to conspiracy theories, reflecting a growing lack of trust in law enforcement, according to a respected political analyst. As the dust settles on a R6.3 billion agreement between the South African Reserve Bank and Ibex Holdings, the former Steinhoff empire, a far more unsettling question refuses to go away. No one can say where Jooste was buried. While a statement by the SARB confirmed that both parties reached a settlement allowing Ibex to wind down operations, repay creditors, and conclude all related legal proceedings, the nation is still asking, ''Where is the proof that Jooste is truly dead?'' After the full extent of the Steinhoff scandal came to light, Jooste was fined last March R475 million by the Financial Sector Conduct Authority (FSCA) for accounting fraud. He allegedly took his own life shortly after being informed that an arrest warrant had been issued against him, a death that has since been shrouded in mystery. This ongoing uncertainty has led to growing concerns about the lack of transparency from the authorities and those around Jooste. Political analyst Kenneth Mokgatlhe also raised doubts about Markus Jooste's reported death, saying the details remain unclear and unconvincing. 'Markus Jooste's death remains a mystery, details are very sketchy, and to be honest, I am not absolutely convinced that he died,' Mokgatlhe said. Adding that conspiracy theories reflect a growing lack of trust in the police, Mokgatlhe said: 'The public's engagement with these theories signals a deep loss of confidence in the agencies meant to bring closure to such high-profile cases. ''The police's silence is concerning, and when you consider it alongside the serious allegations made by Commissioner Mkhwanazi, it highlights the glaring weaknesses within SAPS.' Mokgatlhe warned that this situation could have serious political consequences. 'It adds to the ongoing challenges facing the police service and further erodes public faith in the system.' He further stated that the state must confront growing public mistrust by thoroughly investigating Jooste's alleged death and presenting clear evidence to confirm it. 'The government must provide concrete proof to put this matter to rest. Right now, it creates the impression that Jooste is being shielded by powerful political interests,' he said. Mokgatlhe also criticised the perceived racial disparity in how corruption cases are handled in South Africa, arguing that white individuals often escape accountability. 'For instance, look at how Maria Ramos was left unpunished after acknowledging that she manipulated our currency. Nothing happened to her. Look at what happened to Adv. Mkhwebane, when she went after the likes of Absa, she was victimised,' he added. As previously reported by IOL, Western Cape police dismissed the allegations as unfounded, stating that a post-mortem had been conducted and the report filed in the docket for court proceedings. 'The investigation into the death of the late Mr Jooste had been concluded, and the docket was submitted to the National Prosecuting Authority to be placed on the court roll where a formal inquest will be conducted. "The firearm used during the incident was subjected to ballistic tests. Thereafter, returned to the executor as the weapon was registered in the name of the deceased. A report of the ballistic test is filed in the docket for court purposes. The result of both reports will only be disclosed during the formal inquest hearing in court. The date is yet to be determined,' read the statement. Meanwhile, uncertainty continues to surround Jooste's reported death, with little clarity offered by officials. The lack of open communication has intensified public doubt, reinforcing the need for accountability and clear answers to maintain confidence in the justice system. The Star [email protected]
Reuters
a day ago
- Business
- Reuters
South African rand falls before expected rate cut, looming US tariffs
JOHANNESBURG, July 28 (Reuters) - The South African rand fell on Monday as the dollar gained on global markets, with analysts saying its decline was exacerbated by expectations for a local interest rate cut and jitters over looming tariffs on South African exports to the United States. At 1430 GMT the rand traded at 17.8650 against the dollar , about 0.9% weaker than Friday's closing level. The dollar was up 0.7% against a basket of global currencies . Economists polled by Reuters expect the South African Reserve Bank to announce another 25 basis point reduction in its repo rate (ZAREPO=ECI), opens new tab on Thursday, reducing South Africa's relative interest rate return compared to less risky markets. Four days before U.S. President Donald Trump's 30% tariffs on South African goods take effect on Friday, Pretoria is yet to agree a trade deal with Washington, with its agriculture and automotive sectors bracing for potential job losses. Domestic data releases this week include June money supply (ZAM3=ECI), opens new tab and private sector credit extension (ZACRED=ECI), opens new tab on Tuesday, June budget figures (ZABUDM=ECI), opens new tab on Wednesday, and June producer inflation (ZAPPIY=ECI), opens new tab and trade (ZATBAL=ECI), opens new tab numbers on Thursday. The Johannesburg Stock Exchange's Top-40 index (.JTOPI), opens new tab was last down 0.3%. The benchmark 2035 government bond was stronger, as the yield fell 4 basis points to 9.81%.
IOL News
2 days ago
- Business
- IOL News
Will South Africans be blessed with another interest rate cut this week?
Inflation data currently supports an interest rate cut, but it's not a clear cut case. Image: AI The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) is set to make its next interest rate decision on Thursday, July 31, and while the prospects of a rate cut appear positive, it's not a clear cut case according to economists. 'The market currently expects a cut in the key repo rate by 25 basis points - which would be the third reduction this year,' said Thys van Zyl, Chief Executive of Everest Wealth Advisory. 'A lower interest rate would bring welcome relief to consumers.' However he warned that while headline inflation remains relatively low, food price inflation is now at its highest level in more than a year, which poses risks for interest rate expectations as well as consumer spending. Consumer Price Inflation (CPI) rose to 3% in June, up from 2.8% in May. This was the first time in three months that inflation returned to within the Reserve Bank's 3% to 6% target range. However, CPI remains well below the 5.2% seen this time last year. Food prices remain higher than expected, particularly red meat thanks to foot-and-mouth disease, yet consumer goods inflation remains subdued. Johann Els, chief economist at Old Mutual, said the weak overall pricing pressure in the economy justifies a further 0.25 percentage point interest rate cut this week. ALSO READ: Understanding the impact of rising inflation on SA's interest rates Dr Elna Moolman, Standard Bank's group head of macroeconomic research, also believes the current inflation rate supports the case for an imminent interest rate cut, and although she expects inflation to rise over the coming months, it should remain 'reasonably benign'. However, Van Zyl warned that the central bank may be reluctant to cut rates too aggressively if global food and oil prices continue to trend upwards. 'Earlier this year, it was anticipated that the Reserve Bank could cut interest rates one or two more times in 2025. Following the January and May reductions totalling 50 basis points, it's increasingly likely that we'll see only one more cut this year – and perhaps not before year-end,' Van Zyl said. Uncertainty surrounding the proposed 30% tariffs on South African exports to the US is another factor weighing on the economy, he added, as these could impact export-driven industries such as manufacturing, mining and agriculture. 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. 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. Advertisement Next Stay Close ✕ ''This uncertainty, combined with rising inflation, puts policymakers in a difficult position – trying to support growth while also protecting the rand and price stability'. Potentially lower inflation targets later in the year or in 2026 could also jeopardise the interest rate situation for South Africans going forward. South African Reserve Bank (SARB) governor Lesetja Kganyago has strongly advocated for the country to lower its inflation target from 4.5% to 3%. Experts argue that a lower inflation target would improve price stability, reduce borrowing costs and enhance investor confidence in the long term. However, many feel it would entail some short term 'pain' for the sake of long-term gain. Yet tightening monetary policy could be a dangerous move in the current economic climate, warns Frederick Mitchell, chief economist at Aluma Capital. 'Conventional wisdom suggests that raising interest rates can curb inflation, yet in the current environment, where inflation remains subdued but economic growth is threatened, tightening monetary policy may exact an economic toll without addressing the underlying trade issues,' Mitchell explained. IOL Business
