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South African rand weakens after c.bank’s 25 bps rate hike

JOHANNESBURG, Jan 26 (Reuters) – South Africa’s rand weakened on Thursday after the central bank raised its main lending rate(ZAREPO=ECI) by 25 basis points to 7.25%, less than expected by most economists polled by Reuters.

At 1522 GMT, the rand traded at 17.1600 against the dollar, 0.31% weaker than its previous close.

The South African Reserve Bank (SARB) played it cautiously with the latest rate hike, suggesting it is nearing the end of a tightening cycle that started in November 2021, analysts said.

A Reuters poll published last week showed that 11 of 20 economists expected the central bank to hike rates by 50 basis points (bps) to 7.50%. Eight projected an increase of 25 bps and one economist forecast no change.

“The decision to scale back on the pace of tightening comes against the backdrop of slowing growth. That said, we expect one final 25bps rate hike in March, after which the SARB is expected to leave rates on hold until the second half of the year,” said ETM Analytics in a research note.

The central bank now forecasts the economy will grow 0.3% in 2023 and 0.7% in 2024, a worse prediction than at its last MPC meeting in November, amid a backdrop of worsening power cuts.

It sees consumer inflation of 5.4% in 2023 and 4.8% in 2024, it said on Thursday.

In the equities market, the Johannesburg All Share index (.JALSH) climbed 0.98% to 80,508 points, while the Top-40 index (.JTOPI) rose by 1.04% to 74,479 points.

Stocks were buoyed by market heavyweight technology investment companies Prosus NV (PRX.AS), and its South African parent Naspers (NPNJn.J) after they said late on Wednesday that they are cutting up to 30% of jobs at their corporate offices.

Johannesburg-listed shares of Prosus closed 2.99% firmer at 1,450 rand, while Naspers jumped 3.60% to 3,500 rand.

Finishing the day as the second biggest gainer, Truworths (TRUJ.J) rose by 4.17% to 66.22 rand after the fashion retailer forecast half-year profit growth of up to 11%, a sign that consumers were still shopping despite inflationary and high interest rates pressures.

Truworths’ forecast and sales update pulled other peers up, with fashion and food retailer Woolworths (WHLJ.J) rising 2.17%, budget clothing and furniture retailer Mr Price (MRPJ.J) up 3.01% and clothing retailer TFG (TFGJ.J) up 1.10%.

The government’s benchmark 2030 bond was almost unchanged, with the yield at 9.630%.

source: reuters