The rand lost some steam during the European session on Friday as global risk sentiment soured, having posted gains in previous sessions on the back of a better-than-expected GDP release and favourable external backdrop according to NKC Research.
Since rate lift-off is years away, so is tapering. The Fed’s median dot plot rate estimates will likely remain unchanged, showing no change in the policy rate through 2023. We believe rates are on hold until mid-2024 and QE tapering will not start until 2023. As economic momentum slows and Covid-19 cases surge, we look for monetary policymakers to fortify the bridge that supports the economy until vaccinations become widely available. Even if fiscal aid is passed within the next week, we still expect the Fed to lengthen the maturity of its Treasury asset purchases to provide more monetary stimulus.
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