South Africa’s rand weakened for the first time in four days and bonds gained after inflation unexpectedly slowed in June, adding to speculation that the central bank will leave borrowing costs at a 30-year low.
The inflation rate declined to 5.5 percent in June from 5.6 percent in May. The median estimate in a Bloomberg survey of 20 economists was for an increase to 5.8 percent. While the bank may not preemptively raise borrowing costs to curb inflation, price increases are preventing it from stimulating an economy expanding at the slowest pace since the 2009 recession, South African Reserve Bank Governor Gill Marcus said last week after leaving the benchmark rate unchanged.
“This will certainly ease any concern about a rate hike,” Kevin Lings, chief economist at Stanlib Asset Management Ltd., said by phone from Johannesburg. “The SARB can comfortably leave rates where they are and focus on growth, and how to respond to that.”
South Africa’s currency depreciated 0.1 percent to 9.6954 per dollar as of 11:30 a.m. in Johannesburg, rebounding from yesterday’s close at the strongest level in almost two months. Yields on benchmark 10.5 percent bonds due December 2026 fell two basis points, or 0.02 percentage point, to 7.96 percent.
The central bank forecast that inflation will breach the 3 percent to 6 percent target band this quarter. In June, prices rose 0.3 percent in the month. The rand has weakened 13 percent against the dollar this year, the worst performer among 24 emerging-market currencies tracked by Bloomberg.
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