The South African central bank (SARB) is likely to hike its key rate by a further 25 bps today to 7.5%. A lot already seems to have been priced in, so that the reaction of the Rand exchange rates should be moderate, economists at Commerzbank report.

SARB likely to hike further today

“With a view to rising inflation risks it cannot be excluded that a larger rate step of 50 bps will at least be discussed. However, due to the weak economy we assume that the majority on the board will vote in favour of a moderate 25 bps hike.”

“Possible ZAR gains in case of a hawkish seeming SARB are likely to be limited.”

“We do not foresee a sustainable recovery in ZAR in the current market environment and in view of the domestic challenges. ZAR investors are likely to remain cautious going forward due to possible fiscal risks too.”