Sarb keeps repo rate at 6.5%

THE SA Reserve Bank (Sarb) kept its benchmark repurchase rate – at which it lends to commercial banks – unchanged at 6.5% yesterday, saying the stance was appropriate given the forecast inflation trajectory and the state of the economy.

The move follows a 25 basis point decrease at the last meeting, in March, of the monetary policy committee (MPC) chaired by governor Lesetja Kganyago.

“With risks and uncertainties at high levels, the MPC will maintain its vigilance to ensure that inflation remains well within the inflation target range, and will adjust the policy stance should the need arise,” Kganyago said.

He said yesterday’s decision was unanimous among MPC members, and means commercial banks will also hold their prime lending rate to consumers steady at 10%.

The interest rate call was widely expected, as Sarb balanced weak economic growth against rising price pressures.

Data from Statistics SA on Wednesday showed consumer price inflation accelerated to 4.5% year-on-year in April from 3.8% in March.

StatsSA said a one percentage point increase to 15% in VAT, which came into effect in April, had an impact on the CPI figure, as did a new health promotion levy in the form of a sugar tax.

An increase in interest rates at this point would have hurt the ailing economy, which the National Treasury expects to grow by just 1.5% this year.

Sarb said its own forecast for gross domestic product growth was unchanged at 1.7% this year, but had been revised up from 1.5% to 1.7% for next year. – African News Agency (ANA)