Rate cut bets rise as geopolitical tensions weigh on rand and economic outlook

SENTIMENT is thawing among South African fund managers that the South African Reserve Bank (Sarb) will cut the repo rate at its next meeting next week as jitters over geopolitical tensions stemming from the US and Israel war on Iran entrench, with the 12 month rand forecast weakening.

- TAWANDA KAROMBO

A new Bank of America Securities survey shows that 75% of polled South African fund managers believe the Sarb will cut rates at its next rate decision meeting compared to 94% previously.

Uncertainty from the Israel/US war in Iran have also given rise to managers who are unsure of what to expect for the next Sarb rate decision.

“A weaker dollar and proposed 3% inflation target put on hold with rising oil prices. Elevated metal prices provide a buffer, for now,” said John Morris, South Africa strategist for Bank of America Securities.

This comes as economic optimism among the South African fund managers has now come off recent peaks, with expectations of a better backdrop deteriorating with geopolitical uncertainty.