South Africa’s rand trimmed its losses against the dollar on Thursday, after the Central Bank cut lending rates for a fifth time in a row to support an economy strangled by the COVID-19 pandemic. In the late afternoon, the rand was 0.47% weaker at 16.5500, after hitting a session low of 16.6900 before the rate decision.
The Central Bank’s five-member monetary policy committee (MPC) voted 3 to 2 for a 25-basis points rate cut to a new record low of 3.50%.
William Jackson, chief emerging markets economist at Capital Economics: “It’s clear that the balance on the MPC is becoming less dovish. Of the five MPC members, two voted for no change in rates. That was reflected in the language in the accompanying statement too. Whereas the risks to the inflation outlook were described as ‘to the downside’ at the last meeting, this time they were described as ‘balanced’.”
The Central Bank forecast gross domestic product to contract 7.3% in 2020, from an earlier prediction for a 7.0% contraction.
South Africa has recorded the most coronavirus cases in Africa, with total infections just shy of 400,000 and rising by more than 10,000 a day recently.