RELIEF AS REPO RATE STAYS UNCHANGED
THE South African Reserve Bank kept its benchmark repo rate yesterday unchanged as expected, saying that while it was still concerned about inflation, the weak economy had provided some room to delay further policy tightening.
“The MPC (Monetary Policy Committee) is aware that some of the favourable factors that contributed to this decision could reverse quickly, and remains ready to react appropriately to any significant change in the inflation outlook,” Reserve Bank Governor Lesetja Kganyago told a news conference yesterday.
The rand extended gains against the dollar after the decision, while government bonds also strengthened.
All 31 economists surveyed about a week ago forecast the bank would keep its repo rate on hold, but expected a 25 basis point increase at its November meeting to tame inflation pressures.
The Central Bank said the medium-term inflation trajectory remained outside its 3% to 6% target band until the second half of 2017, but there have been some improvements in the nearterm prospects following successive downside surprises.
The outlook for the economy remained extremely challenging, following a 1.2% contraction in the first quarter of this year, it added.
The bank now expects the economy to remain at a standstill for the whole of 2016, compared with its May forecast for tepid expansion of 0.6%.
The bank has previously warned that SA, which dodged credit rating downgrades from Moody’s, Fitch and S&P earlier in the year, still faced the risk of cuts if the ailing economy showed no improvement.
Pam Golding Group chief executive officer Andrew Golding said the decision will come as a relief for cashstrapped homeowners with mortgages who are faced with inexorably rising consumer costs.