Yet the recent upward correction in interest rate expectations in several advanced economies, including the US2 and the UK3, serves as a warning that even a gradual pace of monetary policy normalization – after years of very loose global monetary conditions – may not be without adverse consequences for emerging market currencies such as the rand.
That is, the outright purchase of JGBs with remaining maturity of 1–2 years and T-bills is to reduce the term-premiums of risk-free rates. The scheme to provide 3- and 6-month funds at the overnight rate already instituted was aimed at lowering rates longer than the overnight rate, and has been continued and included in this program.