Rand crashes to another record low
to a record low as another jumbo rate hike by the South African Reserve Bank raised concerns about the outlook for economic growth.increased its policy rate by 50 basis points to 8.25%, the highest since the financial crisis, saying restrictive policy is necessary to curb inflation even as it warned that more rand weakness was likely. The move will add strain to an economy that’s forecast to grow by just 0.3% this year in the face of unprecedented electricity shortages.
The rand slumped as much as 2.6% to R19.76/US$, breaching the record-weak level set last week in the wake of a diplomatic row with the US over South Africa’s ties with Russia. The government bond yield curve steepened, with the rate on 2044 securities rising 11 basis points as traders priced in a growth slowdown.“The health of the local economy is now the primary concern,” said Brendan McKenna, an emerging markets strategist at Wells Fargo Securities in New York.
All of the monetary policy committee’s five members voted for the half-point increase, the first such unanimous decision since September 2021. There have been a cumulative 475 basis points of interest rate hikes since November 2021, the most aggressive tightening cycle in at least two decades.
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