The global markets are reacting to the fact that Donald Trump has been elected as the 47th President of the United States but how will this impact the possible interest rate coming later this month?
South Africans have been waiting with bated breath for another interest rate cut from the Reserve Bank.
The South Africa Reserve Bank’s (Sarb) Monetary Policy Committee (MPC) is expected to deliver its decision regarding the interest rate cut on November 21,2024.
Before Trump’s victory the overall sentiment was that strong the likelihood of a 25 basis points cut would happen.
Trump’s win on Wednesday has sent shock waves on the economies of emerging markets like South Africa and the rand took a major blow.
The rand was trading at around R17.72 against the dollar at 10:10am on Wednesday morning as it became clear that Trump was going to win the 2024 US Election.
The rand recovered somewhat on Thursday and was trading at around R17.48 to the dollar at 11:00am.
Did Trump’s win affect us?
Izak Odendaal, the Chief Investment Strategist at Old Mutual Wealth said that South Africans do not need to fear and that even though the rand took a hit the Reserve Bank’s outlook will not change.
He explained that Trump’s win has strengthened the dollar and this placed some pressure on emerging market currencies and interest rates.
“While the rand is trading about 1.5% lower, this is not a big move by its historic standards and therefore does not change the outlook for SA Reserve Bank rate cuts in the short term,” he explained.
“A cut at the next monetary policy committee meeting is still likely.”
Trump could be good for our economy
The win by Trump may have some positive effects on SA’s economy, according to Aluma Capital economist, Frederick Mitchell.
"For a country like South Africa, former president Trump's win could have some positives but also some less favourable implications for our domestic economy," Mitchell noted.
He said aggressive trade actions from the US may trigger a depreciation of the rand, complicating the import landscape while driving up import prices as a result.
"Conversely, anticipated investment and trade could strengthen the currency, contingent on the US market's response to Trump's policies,“ Mitchell added.
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