USD/ZAR shot higher after South Africa’s central bank cut rate 50 bps to 5.00% in a surprise move.
Just two of 18 economists forecast the move although the futures market pointed to a solid chance of a cut.
SARB Governor Gill Marcus lowered growth and inflation forecasts and said officials wanted to minimize the impact of global turmoil.
With central banks in developed countries virtually tapped out, it’s up to emerging market leaders to try and revive the global economy.
Other than China, this i’s unlikely to provide a huge boost and it’s a dangerous game because EM inflation is already high. If growth rebounds, inflation expectations could become unhinged and force central banks to rapidly hike, which would snuff out any recovery.
