JSE set to track firmer global markets as attention turns to Bank’s rates decision

The JSE is expected to go higher on Thursday, given the positive mood in the Asian markets and after Wall Street erased this week’s steeper losses, which were sparked by rising Covid-19 cases.

Hong Kong’s Hang Seng was up by a robust 1.77%, while Japan’s Nikkei 225 index rose 0.58%.

In SA, attention will be on the Reserve Bank, which is widely expected to leave interest rates unchanged at record lows when its monetary policy committee concludes its policy meeting in the afternoon. However, the Bank will likely have plenty to say about the economic implications of the recent social unrest.

Gauteng, which is SA’s commercial heartland, is still in the grip of Covid-19, fuelled by the Delta variant. The recent surge in cases led to stricter restrictions, including a ban on alcohol sales, which would have dented business and consumer confidence.

Markets and economists will be particularly interested in how the policymakers see the trajectory of inflation, given the elevated oil prices while the rand continues to be volatile against the dollar.

BNP Paribas SA senior economist Jeff Schultz said last week the Bank will prepare ground for a potential increase in interest rates in September.

Rising food and fuel costs have been sufficient for BNP Paribas to tweak its expectations to two 25 basis-point hikes in 2021 from one before, though they also expect the Bank to keep rates on hold on Thursday.

The policymakers have lowered SA’s benchmark interest rate by 300 basis points in 2020, with 275 basis points of cuts coming since the onset of the pandemic to bolster the economy.

The rand and commodity prices were relatively stable on the day, with the rand shedding just 0.19% to trade at R14.5590/$. The price of Brent crude shed 0.30% to $72.