SARB Deliver Another 50bps Hike with the Rand Unfazed, USD/ZAR Hits New All-Time High

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MOST READ: USD/ZAR: Price Forecast: SA Inflation Hits Levels Last Seen in May 2022

The SARB raised rates by 50bps for a second successive meeting reiterating the need to get inflation under control. The Governor stated that the decision was unanimous while stressing that the Central Bank believes it has just reached restrictive territory. Governor Kganyago stated that now it will be a case of wait and see as the Central Bank would like to see a sustainable downward trajectory in inflation.

Food price inflation is revised up again, in part due to the lagged impact of the weaker exchange rate and despite global food prices falling in dollar terms. Food price inflation is now expected to be 10.8% in 2023 (up from 9.9%) and 5.0% in 2024 (up from 4.5%). Despite the Governors comments we have heard from the ECB this week who are also battling and concerned about rising food prices with the UK s PM Sunak and Chancellor Hunt following a similar rhetoric. Headline inflation for 2023 is revised up to 6.2% (from 6.0%) with headline inflation for 2024 also increased to 5.1%, before moderating to 4.5% in 2025 on the back of easing food and fuel inflation.


Source: South African Reserve Bank (SARB)

2023 GDP Growth has been revised slightly higher than March at 0.3% with the Governor warning that logistics and power remain significant constraints on growth. An improvement in logistics and a sustained reduction in load-shedding, or increased energy supply from alternative sources, would significantly raise growth.


Source: South African Reserve Bank


A lot headwinds for South Africa and particular for consumers at the moment. Sluggish to non-existent economic growth coupled with rising rates continues to affect the economy while credit delinquencies are on the rise. South Africans are making more use of unsecured credit in order to meet basic needs which is a situation that is not sustainable. The recent drop in inflation down to 6.8% (last seen in May 2022) may be a rare positive however, increases to basic needs such as food prices remain largely elevated. Food (14.3%), personal care (+11.6%) and public transport (14.8%) remain the largest increases YoY, with all of them basic necessities. This doesn’t bode well for the SA consumer or the South African Reserve Bank (SARB) as demand in these sectors is unlikely to dissipate.

The power situation meanwhile may soon have a solution whether we agree with it or not. Government looks set to go ahead with the Karpowership deal which according to analysts will only bring loadshedding down by a single stage. As the country heads into water Eskom has already issued warning about potential stage 8 power cuts meaning even with a Karpowership deal the country would still be languishing in stage 7.

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Part of the dollar’s recent resurgence has been the deadlock and back and forth on the US debt ceiling between Republicans and Democrats. The ensuing indecision has given markets a bit of jitters with the dollar a short-term beneficiary as safe haven demand returns. House Rep. Kevin McCarthy said that he expects a deal to be reached soon in comments issued yesterday.

A deal could actually bode well for the Rand particularly if the USD loses safe haven appeal we could be in for another bearish leg in the dollar. Whether or not we get a debt ceiling deal before USD/ZAR crossing the 20.0000 threshold will be key moving forward.

On the calendar front we still have some high impact data out of the US with tomorrows Core PCE print likely to be as the Fed prepares for its June meeting.


For all market-moving economic releases and events, see the DailyFX Calendar


The initial market reaction has seen USDZAR rally higher from 19.3500 to new all-time highs trading at 19.5700 at the time of writing. Looking at the daily timeframe I do not see any reason that the 20.000 psychological level will not be met sometime soon adding further pain to South African citizens. Having kept a close watch on USDZAR for the better part of 7 years one realization I have come to is that USD/ZAR has an affinity for whole numbers/psychological numbers.

USD/ZAR Daily Chart, May 25, 2023


Source: TradingView, Prepared by Zain Vawda

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— Written by Zain Vawda for

Contact and follow Zain on Twitter: @zvawda


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