Central Bank Tapering Gains Momentum
Global central banks are no longer just talking about reducing stimulatory purchases and raising interest rates – some have already started to put these words into action. Below are some of the recent adjustments:
- ECB – Reducing monthly PEPP bond purchases
- BoC – Reduced weekly net purchases of government bonds by C$1 billion
- RBNZ – Halting pandemic induced bond buying program in July 2021
- Norges Bank – Due to raise interest rates in September 2021
Central Banks Factoring in Rate Hikes
Source: Refinitiv
A lot of the ZAR appeal this year has centered around its attractive yield among its ‘riskier’ peers in the rest of the emerging market (EM) category. However, the tide is changing and South Africa’s attractive yield differential is likely to come under pressure as central banks in developed nations which are considered to be safer - like Norway’s central bank (Norges Bank) - consider rate hikes.
In addition, the US Federal Reserve Bank is scheduled to meet twice in Q4 when revelations around tapering are likely to dominate the talking points.
South Africa’s Uphill Battle
The economic outlook for SA remains a challenge as the southern-most African nation grapples with rising unemployment, sluggish GDP, lower commodity prices and a slow uptake in Covid vaccinations.
Source: StatsSA
Unemployment figures for the second quarter reached 34.4%, the highest number since the Quarterly Labour Force Survey began in 2008. SA GDP for the second quarter rose 1.2% compared with Q1 and marks the fourth consecutive quarter of positive economic growth. However, the economy has not yet reached the pre-pandemic level and currently equates to the same level experienced in Q4 2017.
Vaccinations in South Africa have been made available to anyone 18 and older since August but only recently surpassed the
