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Rand weaker after lower inflation reading

Government bonds were unchanged, with the yield on the benchmark 2026 bond at 8.205%. 
September's release confirms that consumer price inflation remains well under control in South Africa. Image: Bloomberg

The rand dipped on Wednesday as consumer price data fell more than expected in September to 4.1% in annual terms, raising the prospect of further monetary policy easing.

At 1615 GMT, the rand was down around 0.3% at R14.64 per US dollar, slipping from its best level in a month touched on Tuesday.

The consumer price index (CPI), which came in below analysts’ forecasts of 4.2%, showed inflation remained comfortably within the central bank’s 3%-6% target range.

“September’s release confirms that consumer price inflation remains well under control in South Africa,” analysts at NKC Research said in a note. “The moderate inflation outlook and dismal economic growth prospects could justify further monetary policy loosening.”

South Africa’s economy is expected to grow by less than 1% this year, dented by power cuts at struggling state utility Eskom as well as weak business confidence. That’s a problem for President Cyril Ramaphosa, who has staked his reputation on reviving Africa’s most industrialised economy.

The South African Reserve Bank (SARB) cut its main lending rate in July but kept it on hold in September. Its next monetary policy committee meeting is in mid-November.

The Johannesburg All-Share index fell 0.65% to 55,571 points, while the Top 40 index shed 0.74% to 49,244 points, alongside global stocks as risk sentiment took a hit after UK lawmakers pushed the pause button on Brexit.

The risk aversion pushed gold stocks such as AngloGold Ashanti up 5.53% to R315.07, Sibanye-Stillwater up 5.27% to R25.79 and Gold Fields up 4.47% to R83.50.

Government bonds were unchanged, with the yield on the benchmark 2026 bond at 8.205%. 

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