Rate unchanged after Reserve Bank meeting
THE Reserve Bank yesterday kept interest rates unchanged at 7% for a third consecutive time this year, with a weak economic growth outlook balancing out continuing concerns about inflation.
The decision means the prime rate charged by commercial banks stays at 10.5%.
The bank said the growth outlook remained constrained, but revised its forecast for this year to 0.4% growth, having previously said the economy would remain at a standstill.
In response to the decision to keep rates steady, the rand surrendered gains driven by the US Federal Reserve’s call to hold rates.
The rates decision was announced in Pretoria by bank governor Lesetja Kganyago after a monetary policy committee (MPC) meeting.
He said the decision was based on improvements in the inflation forecast, the weak domestic economic outlook and the assessment of the balance of risks.
“The MPC is of the view that should current forecasts transpire, we may be close to the end of the tightening cycle,” Kganyago said.
The decision had been unanimous, and a cut had not been discussed.
Inflation is expected to average 6.4% this year, slightly down from an earlier forecast of 6.6%, the bank said.
The target is 3%-6% and inflation now stands at 5.9%.
But Kganyago said the MPC was still concerned about the overall inflation trajectory.
The bank has hiked the benchmark repo rate by a cumulative 200 basis points since the start of 2014.
In reaction to the announcement, Capital Economics Africa economist John Ashbourne said rates were no longer likely to be hiked later this year.
The bank will hold its final rate call for the year in November.