During its November meeting, the South African Reserve Bank maintained its key interest rate on hold at 6.75 percent. Inflation has been lower than 5 percent since July, which is within the SARB’s 3 percent to 6 percent inflation band. With the election of Cyril Ramaphosa and the stronger South African rand, the central bank is expected to cut its repo rate by 25 basis points during its meeting in March, noted Danske Bank.
“We basically see a challenging transition from Jacob Zuma to Cyril Ramaphosa, which will involve some policy uncertainty near term”, stated Danske Bank.
The USD/ZAR pair is expected to rebound slightly in the near term to around 12.75 in three month before dropping further as the near leader is able to instill his policy agenda, suggesting that the USD/ZAR would drop to 12.50 in six month and 12.25 in 12 month, added Danske Bank.
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