The rand sank to a record low on Thursday after the statement by the South African Reserve Bank’s (SARB) Monetary Policy Committee and subsequent comments by the governor painted a bleak picture for the currency. The currency’s latest slide came after the committee raised its key repo rate by 50 basis points. “Tighter global financial conditions raise the risk profiles of economies needing foreign capital, leading generally to weaker currencies. Given upside inflation risks, larger domestic and external financing needs, and load shedding, further currency weakness appears likely,” the statement said. The rolling blackouts battering the economy are estimated by the SARB to be adding 0.5 of a percentage point to inflation, a state of affairs set to worsen as winter sets in. The SARB’s inflation target range is 3% to 6%, and it does not see it slowing to the midpoint of that range for another two years. Annual consumer inflation in South Africa braked to 6.8% in April from 7.1% in March, but it has been above the top of the SARB’s target range since May of last year. And food inflation remains near 14-year highs at above 14%. Data on Thursday showed that the Producer Price Index slowed significantly in April to 8.6% from 10.6% in March. But there are still plenty of price pressures in the pipeline.
