By Sfundo Parakozov
JOHANNESBURG (Reuters) -South Africa’s rand, government bonds and stocks strengthened on Thursday after the South African Reserve Bank (SARB) trimmed its main lending rate, citing well-contained inflation.
At 1525 GMT, the rand traded at 17.8050 against the dollar, roughly 1% stronger than Wednesday’s closing level, and hovering around a five-month high.
The central bank’s Monetary Policy Committee (MPC) had a split decision, with five members preferring a 25 basis point reduction and one favouring a 50 bps cut.
The majority of economists polled by Reuters expected the bank to trim its main lending rate by 25 bps, though a significant minority thought the rate could be left unchanged.
Inflation is below the central bank’s target range, though policymakers have stressed risks from U.S.
President Donald Trump’s trade war and domestic politics.
The SARB also released detailed modelling of a lower inflation target of 3%, which it said its MPC found more attractive than the 4.5% level it is aiming for.
“This ‘softer’ stance boosted confidence, helping the rand strengthen and government bond yields to fall,” said Wichard Cilliers, head of market risk at TreasuryONE.
He added that investors welcomed the idea that rates might stay lower for longer, especially if a new inflation target is adopted.
Earlier, domestic-focused investors looked to South Africa’s producer inflation data, which was at 0.5% year-on-year in April, unchanged from the previous month.
On the Johannesburg stock exchange, the Top-40 index was roughly up 1%.
South Africa’s benchmark 2030 government bond firmed, with the yield down 12 bps at 8.66%.
(Reporting by Sfundo Parakozov;Editing by Joe Bavier, Alison Williams and Richard Chang)
