The South African Reserve Bank accumulated reserves at a faster pace in June, following two months where reserves only rose modestly, Nedbank’s group economic unit said on Monday.
Earlier the central bank released data showing that foreign-exchange reserves and international liquidity increased by 0,9% and 1,6% respectively over the month.
Gross reserves rose by 1,3% to R272-million from R262-million in May, mainly due to a rise in gold reserves, which rose by 5% to $3,7-billion from $3,5-billion the previous month.
Gold reserves were pushed up by a higher gold price in June.
Taking this into consideration, as well as the 8% depreciation of the rand against the dollar, the rand value of gross reserves increased by 4% or R10,5-million in June to R272-billion from R262-billion in the previous month.
”The level of reserves could comfortably cover 5,2 months of imports, unchanged from last month,” Nedbank said.
However, it warned that a new round of global risk aversion, concerns about the local economy and a weaker and more volatile rand could contain the Reserve Bank’s ability to accumulate foreign-exchange reserves at a faster pace in the short term.
It added that accumulating reserves at a time when the rand was weak is ”counter-intuitive”, as it will only add to the rand’s woes. ”A weaker rand will add to inflation, making the Reserve Bank’s task of bringing inflation back under control more difficult,” Nedbank said.
The Reserve Bank’s focus is likely to be mainly on inflation — inflation and inflation expectations are expected to peak only after the monetary policy committee meeting in August.
This makes another 50-basis-point interest-rate hike in August very likely, Nedbank said. The risk of another 50-basis-point hike in October has also increased sharply.
Thereafter interest rates are likely to remain unchanged at higher levels until the end of the year. — Sapa