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Repo Rate Cut Discussion Weakens Rand

After comments made by Reserve Bank Governor Lesetja Kganyago this month which implied a coming 25 base point cut early in 2020, the Rand took a quick look above the important 50 cent barrier. It jumped up to just over R14.50 to 1 US$.

‘the Repo rate remains unchanged at 6.75%’

For the moment, however, the Repo rate remains unchanged at 6.75% and it does appear in the midst of a weakened economy that the proposed rate cut for the end of the year may only happen early next year. A lot will depend on the rating by Moody’s and the possible mass exodus of foreign investment which will follow a downgrade to “junk” status if that were to happen.

At present, another factor affecting everyone unpredictably is that USA and China are at war over the 5G networks (basically the fastest internet you have ever heard about. Imagine a movie download in 3 seconds) and this is spilling over to the rest of the world. It has been compared to the US/Russia Space Race or even the cold war of years gone by and is impacting markets and economies globally.

Locally, it seems that GDP is still weak but inflation was slightly (very slightly) less than anticipated and thus the Repo Rate stays the same for now.