JOHANNESBURG (Reuters) -The South African rand slipped in early trade on Thursday, as investors looked ahead to the central bank’s interest rate decision, the first meeting since the finance minister officially confirmed that the central bank’s inflation target is now 3%.
At 0728 GMT the rand traded at 17.2225 against the dollar, about 0.2% weaker than its previous close.
The South African Reserve Bank (SARB) is scheduled to announce later in the day whether it will adjust its main lending rate.
Fourteen economists polled by Reuters predicted that the central bank would keep its repo rate at 7.00% and 15 forecast a 25-basis-point cut.
Headline inflation in Africa’s most industrialised economy quickened to 3.6% year-on-year in October from 3.4% in September, staying within the 1 percentage point tolerance band of the central bank’s new 3% target announced last week. The bank previously had a target range of 3-6%.
“Yesterday’s inflation figures do not necessarily make things any easier today. With growth of around 1% and a real inflation rate currently above 3%, calls for relief on the interest rate side are quickly becoming louder,” said analyst Volkmar Baur in a research note.
Some analysts believe Thursday’s decision could be a close call as conservatism from the SARB in holding the interest rate steady would send a clear market signal that they are serious about defending the new 3.0% target, even if technically it is being ‘phased in’.
South Africa’s benchmark 2035 government bond was flat in early deals, with the yield at 8.675%.
(Reporting by Anathi Madubela; Editing by Alexandra Hudson)
