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Africa, Forex

South Africa’s rand firms on surprise rate cut

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JOHANNESBURG, Jan 16 (Reuters) – South Africa’s rand inched up on Thursday after the central bank unexpectedly cut its main lending rate by 25 basis points to 6.25%, providing a stimulus to the flagging economy as it lowered its inflation forecasts significantly.

The majority of analysts polled by Reuters had expected no change in rates because of risks associated with a February budget speech and a scheduled review of the country’s last investment-grade credit rating by Moody’s in March.

At 1624 GMT, the rand marginally rose 0.06% to 14.3970 per dollar.

Gains were capped by Reserve Bank Governor Lesetja Kganyago’s bleak outlook for economic growth: lowering predictions this year and next to 1.2% and 1.6% respectively.

The bank called Africa’s most industrialised economy “weak” and “vulnerable” and said electricity supply constraints would probably keep activity muted in the near term.

Some analysts were doubtful that Thursday’s policy easing would do much to lift the growth rate, pointing to a need for meaningful economic reform.

“This cut is positive but one or even two cuts will not change things significantly for the outlook for the economy,” said Magdalena Polan, global emerging markets economist at Legal & General Investment Management.

In fixed income, the yield on the benchmark government bond was flat at 8.190%.

Stocks firmed, led by telecoms company Telkom SA, which was up 5.43% to 36.49 rand after it told unions on Wednesday it could cut up to 3,000 of more than 15,000 staff as it struggles with declining performance in fixed voice and fixed data services.

Sibanye-Stillwater also gained, rising 3.85% to 37.22 rand after it said it has concluded a consultation process that reduced the number of proposed job cuts as it restructures the loss-making Marikana operations it acquired last year.

The Johannesburg All-Share index climbed 0.26% to 58,217 points, while the Top 40 index gained 0.25% to 51,965 points. (Reporting by Nqobile Dludla Editing by Frances Kerry)

South African Rand coins are seen in this photo illustration

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