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Stronger rand, inflation rate could lead to interest rate cuts - analyst

Stats SA revealed inflation has slowed to 6.3% in February compared to the same time last year, which is down from January’s 6.6%.

Picture: EWN

CAPE TOWN - A stronger rand coupled with a better than expected inflation rate could lead to interest rate cuts - sooner than expected.

The rand has strengthened by more than 3% since the beginning of March.

On Wednesday, Stats SA revealed inflation has slowed to 6.3% in February compared to the same time last year, which is down from January’s 6.6%.

Market analyst George Glynos says the rallying rand is expected to carry the most weight in the Reserve Bank’s decision on future interest rates.

“I think inflation forecasts are going to be reviseddownwards dramatically during the course of the next few months. And it wouldn’t surprise me at all if we started talking about rate cuts within the next two to six months.”

The currency showed further gains on Wednesday, on the back of a better than expected current account deficit of 1.7% of GDP in the last quarter of 2016 - the smallest shortfall in six years.

Some experts anticipate inflation will pull back even further throughout 2017, specifically in the food category.

The Reserve Bank is scheduled to discuss interest rates next week.

(Edited by Winnie Theletsane)