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Rand slides after SARB holds policy rate at 7%

Commerzbank said Brent crude moving above USD 100 per barrel and a less hawkish outlook left the decision feeling out of step with inflation concerns.

Reported · Written up by our desk · Major Pairs

Commerzbank’s Volkmar Baur said the South African Reserve Bank’s decision to keep its policy rate unchanged at 7% came as a negative surprise, particularly after June inflation rose.

Baur linked the sell-off in the rand to guidance that was less hawkish than expected, noting the currency fell more than 2% against the US dollar and posted its weakest day since March 3, shortly after the start of the Iran conflict.

He also pointed to the backdrop of Brent crude rising above USD 100 per barrel, saying the move should have raised inflation concerns in South Africa but the policy decision did not reflect that shift.

Baur added that the statement omitted references to three further rate hikes that had been mentioned previously, and he warned further rand weakness remains a risk.

Latest closeWTI crude $92.23 ▲6.2%|Brent $100.54 ▲6.9%

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